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Gasoline Prices Tumble As Natural Gas Costs Soar

Posted on: Tuesday, 29 November 2005, 18:00 CST

By Adam Wilmoth, The Daily Oklahoman

Nov. 29--While consumers are benefiting from falling gasoline prices, higher-than-average natural gas costs likely will more than offset any savings, local industry observers warned Monday.

"The fall in gasoline prices already has been helpful to consumer confidence nationally and is very fortuitous with Christmas shopping just coming on full swing," University of Oklahoma economist Robert Dauffenbach said.

"But given that gasoline is still 30 cents higher than a year ago and households are facing high natural gas prices, I can't draw any conclusion other than many households are going to be impacted significantly by high energy costs this winter."

The statewide average price for a gallon of regular unleaded gasoline was $1.96 Monday, down from a high of $3.06 on Sept. 3, shortly after Hurricane Katrina crashed through the Gulf of Mexico refinery center.

Natural gas prices also have tumbled since the back-to-back barrages of Hurricanes Katrina and Rita. But despite a drop from more than $15 per thousand cubic feet in early October, Monday's closing price of $11.18 on the New York Mercantile Exchange still is well above the five-year average.

Falling gasoline prices are helping to make up for reduced revenues experienced earlier this fall at Oklahoma City's Metro Delivery and Courier Service, but now contractor Martin Dawes is bracing for higher heating costs at home.

"What you get with one hand is taken away with the other," he said.

The delivery company raised its prices twice this year to keep up with the soaring cost of gasoline. Management is hoping to lower the prices back again, Dawes said, but first they are waiting to see whether gasoline costs continue to drop.

"We don't like to raise our prices every time we turn around," Dawes said. "Usually it takes years to raise the price. We don't want to rise prices every time the price goes up 10 cents. We absorbed it quite a while hoping it would go back down."

Bruce Bell, chairman of the Mid-Continent Oil and Gas Association of Oklahoma, attributed much of the downturn in gasoline prices to the cost of crude oil, which he said has stabilized recently because of increased imports and mild temperatures.

The price of crude oil hit a record high of $70 a barrel after the hurricanes but has since dropped to $57.36 on Monday. Bell said the prices of crude oil and gasoline likely will stabilize over the next few weeks.

"I would expect prices to bounce a little bit up or down with weather conditions, but I don't see it going way back down below $50," he said. "And unless we have a political event, I don't see prices going back much above $60."

Natural gas prices, however, could vary widely based on weather, Bell said.

But even if the price heads down, consumers' heating bills still are expected to be significantly higher than year-ago levels. Oklahoma utilities contract to buy about half their winter natural gas needs during the spring and summer months when prices typically are at their lowest. While the summer prices were several dollars per thousand cubic feet less than current price, they were still significantly above the five-year average.

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Copyright (c) 2005, The Daily Oklahoman

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Source: The Daily Oklahoman

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