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$1.99 Gas Unlikely to Return: Despite Slight Drop Last Month, Experts Say Higher Demand, Lower Supply Will Push Prices

Posted on: Wednesday, 11 January 2006, 09:00 CST

By Noelle Phillips, The State, Columbia, S.C.

Jan. 11--Count on these things being up this morning:

The sun.

The American flag.

Gasoline prices.

After a slight drop in December, gas prices have climbed again. On Tuesday, AAA Carolinas reported an S.C. statewide average of $2.21 per gallon, up more than 17 cents a gallon from a month ago.

In Columbia, prices averaged $2.23 per gallon, which was 20 cents higher than last month. Locally, prices are 56 cents higher than they were on Jan. 10, 2005, but below records set when the $3 barrier was broken in the fall.

Sarah Davis, a AAA Carolinas spokeswoman, said the latest jump is a result of the increasing cost of a barrel of crude oil. Crude oil traded Tuesday at about $64 a barrel.

Crude oil prices can be impacted by natural disasters, terrorist attacks and just plain old consumer demand.

Right now, oil traders are speculating on a major geopolitical event in 2006 that will impact the supply, Davis said. For example, Iran's insistence on producing uranium is leading some to expect a conflict between it and the West, she said.

"Aside from the speculation, crude oil prices are a bit inflated right now," Davis said.

Michael Fields, executive director of the South Carolina Petroleum Marketers Association, said the higher prices were simply a result of supply and demand. Consumers across the nation used a lot of oil in December because of cold weather and holiday travel, he said.

"Unfortunately, the time of the year we're in, the inventory of gas is lower," Fields said. "The cost we see at the pump in Columbia is reaction from it costing more at the wholesale level."

AAA predicts gas prices will continue to rise, especially in the spring when refineries reduce production for seasonal maintenance. The national average could reach $2.50 later in the year.

Davis said consumers should not look for gasoline to return to prices below $2 per gallon.

Still, Fields tried to look at the bright side of the South Carolina market.

"I'd be remiss if I didn't say we still have some of the lowest prices in the country," he said.

Reach Phillips at (803) 771-8307 or nophillips@thestate.com [mailto:nophillips@thestate.com].

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Copyright (c) 2006, The State, Columbia, S.C.

Distributed by Knight Ridder/Tribune Business News.

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Source: The State (Columbia, S.C.)

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