Diesel Prices Spike Above $3 Per Gallon; Gas Prices Hit Record $2.66
Aug. 10–Diesel fuel punched through the $3 barrier in California on Tuesday. Motorists must be wondering if gasoline isn’t far behind.
Gas and diesel prices set records across California and the nation, the result of rising crude oil prices and scattered, coast-to-coast refinery problems.
AAA said the average statewide price for self-serve regular gas increased 2cents a gallon to a record $2.66. In Sacramento it rose to $2.59, also a record.
Diesel fuel, which represents about 28percent of the market, rose to $3 statewide and set records in practically every city surveyed by AAA, formerly known as the American Automobile Association.
Industry analysts said diesel prices may be headed back down soon, but gas could stay sky-high through the summer driving season.
“We’re probably going to hang around at the level we’re at for the rest of the summer,” said Denton Cinquegrana, who tracks West Coast petroleum markets for the Oil Price Information Service.
Michael Johnson, a Vacaville construction worker who was filling up his pickup truck in midtown Sacramento, said the extra money spent on gas is eating into his household budget.
“I could be putting that toward diapers or something,” the father of two said as he pumped regular gas at $2.64 a gallon at the Circle K/76 station on Alhambra Boulevard.
Howard Roth, chief economist at the state Department of Finance, said fuel prices could start to nibble away at the economy. The effect is “small to begin with,” he said. “It could get burdensome if there were other things happening to slow down the economy.”
Roth said tourism in California could suffer.
In the past, retailers such as Wal-Mart Stores Inc. have blamed disappointing sales on high fuel prices.
The high prices have spread nationally. The average U.S. price hit $2.35 for gas and $2.47 for diesel, both records.
The major reason for the ruckus: crude oil. Although a barrel of crude fell 87 cents Tuesday on the New York Mercantile Exchange — to $63.07 — analysts said prices will stay high for the foreseeable future. Each $1 change in a barrel of crude means a 2.4cents-a-gallon change at the pump.
Chris Mennis, an independent energy trader in Aptos, said political problems in Venezuela, Saudi Arabia, Iran and other oil-rich nations will keep crude prices high and translate into bad news for motorists.
There’s “a set of geopolitical risks that in many respects is worse than any I’ve seen in a long time,” he said.
There are domestic problems, too. U.S. energy markets are being rattled by refinery problems in Pennsylvania, the Gulf Coast and Southern California, he said.
Chevron Corp.’s El Segundo refinery had a fire July 20 that curbed gas and diesel production, although diesel suffered more, Cinquegrana said.
There were scattered reports over the past few days of diesel topping $3 a gallon around the state. On Tuesday, the statewide average hit $3 for the first time ever.
Chevron has said repairs should be complete in a few days, and Cinquegrana said wholesale prices fell 7cents a gallon Tuesday in anticipation of supplies loosening. “On the diesel side of things, the worst may be moving into the rear-view mirror,” he said.
In the meantime, truckers and others are feeling the pinch. Sandy Denn, who grows rice on an 800-acre farm in Willows with her husband, Wally, said the higher diesel costs are eating into the farm’s bottom line.
“Prices are going out of sight, yet (rice) prices are not following suit,” she said.
As for gas, there’s no telling where prices are headed. Summer driving season brings higher demand and puts added upward pressure on prices, as motorists stay behind the wheel in spite of high costs.
“We just aren’t seeing any letup in demand,” Mennis said. “The high prices aren’t creating any changes in consumer behavior. That’s been the persistent problem for the past four months.”
He said things could ease after Labor Day, when demand usually slows.
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