• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Gas Price Spike Affecting Everyone, Experts Say

Posted on: Wednesday, 24 August 2005, 18:00 CDT

Aug. 24--The wallet-walloping jump at the pump this month to almost three bucks a gallon for regular unleaded gas is a ticking time bomb in the public's price-pummeled psyche, local experts say.

And as the city and SEPTA prepare to pay millions more for gas and diesel when they renegotiate their fuel contracts with suppliers this fall, the Average Joe will eventually foot those bills, too, with public tax dollars.

"What this country needs is a national oil-and-gas czar like the guy we put in charge of terrorism," said Frank Farley, Temple University professor of educational psychology. "We have a war on terrorism and a war on drugs. It's time we had a war on gas prices."

Farley said the relentless rise in gas prices is a direct attack on the vital need to drive.

"Our wheels are what get us to work, so this gas price crisis is really hitting straight to the heart of America, and it hurts," Farley said. "Once you get outside big urban areas, mass transit is just another lost cause in America because it can't pay for itself. So we have no clear alternatives to using our automobiles."

Farley said the country is "edging toward some kind of crisis" if prices hit $3 and beyond "because ordinary working people, who are hanging on by a thread, will have to re-orient the family budget in major ways to pay for transportation, and that could be devastating."

To put things in perspective, Farley recalled his blue-collar childhood in Alberta, Canada, where his father rode a bicycle four miles to and from work in the stockyards, even in winter.

"That's a quaint idea now," he said, "because the distance people travel to work is astounding. So you've got to drive a car. And having to jerk the family budget around in major ways in order to keep your job is very serious stuff."

This week's read-'em-and-weep gallon-of-regular prices:

--South Philly, 15th and Oregon, Sunoco, $2.79.

--Broad and Wharton, Lukoil, $2.71.

--North Philly, Broad and Girard, BP, $2.65.

--Broad and Lehigh, Sunoco, $2.65.

--West Philly, 44th and Market, BP, $2.69.

And in the 'burbs:

--Paoli, Texaco, $2.72.

--Devon, Sunoco, $2.69.

--Villanova, Shell, $2.74.

And rising. "What's the difference between three bucks a gallon and $2.75 a gallon?" asked Christopher Coyne, associate professor of finance at St. Joseph's University Haub School of Business, and a certified financial planner. "Not much. Is this going to come down to a more comfortable level like under $2? I don't think so.

"People are trying to adjust to this sudden, dramatic price hike while they maintain their lifestyles. If they are putting all this on credit cards, holy cow! People who did not have a credit-card problem will suddenly have one. The big problem with credit cards is that they do not create money, even though people seem to think they do."

Dr. Fred Murphy, professor of management sciences at Temple University's Fox School of Business, said: "The price of a barrel of crude oil -- which accounts for more than half the price of gas at the pump -- has risen from $29.73 in January 2004, to $41.39 in January 2005, to $60 on Aug. 5 to $66 last week."

Why did crude-oil prices double in 18 months? "China and India are building a lot more cars," Murphy said. "Not so long ago, we saw donkey carts and steam trains in those countries. Now, we see automobiles being produced pretty close to U.S. rates. Those automobiles will consume a lot of gasoline.

"But no one's finding a lot of new, super great places to get oil. A lot of the safe areas have acne from all the holes drilled in them. Will there be revolutionary new finds in the Middle East? Probably not. We're looking towards a world where oil is going to be much more scarce due to demand, so high gas prices are going to be around for quite a while."

As drivers take their lumps at the pump, SEPTA and the city of Philadelphia, both on the verge of renegotiating their fuel contracts, will be paying millions more for gas and diesel.

"This past year, we paid $20 million for 15 million gallons of diesel at $1.14 per gallon," said SEPTA spokesman Richard Maloney. "Our contract with Sunoco runs out at the end of this month.

We're in the process of getting bids. We know it's going to cost us more. We just don't know how much more."

Maloney said SEPTA would probably wait until the last possible moment before committing. "When you're buying 15 million gallons of diesel fuel, a couple of cents one way or the other makes a difference," he said.

"Every year, it's a gamble. Some years you win; some you lose. On the last day or so of August, we'll pick the best bid and lock in. Or we can go with spot- market prices on a month-to-month basis. It's been so volatile, it's like playing the stock market, or going to the casino. Anything can happen between now and the end of August."

James Muller, who heads the city's fleet-management unit, said that in response to rising fuel costs, the city decided last year to tie down longer-term fuel contracts.

"Since 2004, we started to lock in gasoline prices," Muller said. "It's the toughest area I have to manage. It's like rolling the dice. It can be very aggravating, but we're trying to save every nickel and dime."

Muller said that under the current six-month contract with Sunoco, which expires on Sept. 30, the city pays $1.77 to $1.83 per gallon for gasoline, and $1.80 to $1.84 for diesel, depending on the size of the gas station.

Muller said that the city has reduced its 6,000-vehicle fleet by 330 in the past year and has economized by replacing some 4x4 SUVs with less-expensive 4x2 Chevy Tahoes.

Conspicuously absent from the city pumps is the Philadelphia Gas Works, which operates its own facilities and has averaged about $634,000 annually for the past three years to fuel its 900 vehicles.

City Budget Director Dianne Reed estimated that the city has saved more than $2 million in the last two years by signing contracts with Sunoco for below-retail prices.

Staff writer Mark McDonald contributed to this report.

-----

To see more of the Philadelphia Daily News, or to subscribe to the newspaper, go to http://www.philly.com.

Copyright (c) 2005, Philadelphia Daily News

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

SUN, LUKOY, BP, CVX, RD, SC, SHEL,

Source: The Philadelphia Daily News

More News in this Category