Gas Prices Rise, Fueled By Storms, Demand

Jul. 13–Just when you thought it might be easier on the wallet to take a road trip, gasoline prices across Oregon and the nation have resumed their upward climb.

In Oregon, the average price for a gallon of regular unleaded gas reached $2.39 Tuesday, roughly 9 cents shy of the record $2.487 a gallon in late April. Nationally, the average reached a record high of $2.31 a gallon Tuesday.

Experts have backed off slightly from predictions of gasoline reaching $3 a gallon during the summer. But it doesn’t look like any immediate relief is in sight.

The culprit? A combination of fear of extreme weather in the South, a volatile oil market worldwide and the continued increase in driving all over the United States, say the experts.

Last week, Hurricane Dennis helped drive up the price of crude oil — used to make gasoline — because speculators feared it would stymie production in the Gulf of Mexico. Although the storm caused less trouble than expected, prices continued to rise — even on the West Coast, which gets no gas from the South.

A tropical storm called Emily is gathering steam and could bear down on oil-producing areas. This has oil speculators nervous, and the reaction is to drive prices up.

“The way things are going, we’re going to hit some pretty high prices,” said Elliott Eki, a spokesman for AAA Oregon/Idaho in Portland. “The petroleum market is a very volatile one, and anything can happen.”

The demand for oil in the United States is up about 3 percent over last year, Eki said. The price for a barrel of crude on the New York Mercantile Exchange closed Tuesday at $60.62, down slightly from last week’s record of $62.10.

Demand in countries such as India and China is also driving up prices while supplies stay the same. China, Eki said, has increased demand 16 percent compared with last year.

Denton Cinquegrana, the markets editor for the New Jersey-based Oil Price Information Service, said the recent spike shows that automobile drivers aren’t willing to put away their keys.

“I was totally under the impression that we’d see a drop in demand this summer from Jane and Joe Driver,” Cinquegrana said. “But nobody has changed their habits, and nobody’s said, ‘Enough’s enough.’ You can probably expect more of the same in terms of cost increases, and there’s a very good chance a lot of states will break records.”

Cinquegrana said any single piece of the oil equation can send the market skyrocketing. He said long before Hurricane Dennis hit Florida, speculators sent a ripple of panic through the market.

Crude prices had dipped well below $50 a barrel in May, but prices started creeping up again last month. Some speculators already are worrying about the heating oil supply this winter. That, Cinquegrana said, could drive prices higher.

“When you have this level of panic out there, the result is going to be higher prices,” he said. “You just can’t avoid it. It’s called ‘Buy the rumor, sell the fact.’ “

That’s a problem for consumers, but it also creates issues for service station operators, said Steve O’Toole, executive director of the Oregon Petroleum Association. He wants Oregon politicians to ask federal officials to look into whether the pricing for crude is “legitimate.”

“There is a concern that we have on how much of this price increase is an artificial one,” O’Toole said. “For us, it’s kind of like the real estate market. We want to know how much is value and how much is just because speculators want to see higher prices.”

O’Toole said service station operators often bear the brunt of customer criticism for the higher gas prices. But his constituents, he said, feel just as powerless.

“We’re at the end of the retail cycle,” he said. “People need to realize that we may have the Shell sign or the Chevron sign out front, but for the most part we’re small businesses. We’re getting hit just as hard as the motorist.”

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