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Katrina Pushes Gas Prices Past $3 a Gallon in Connecticut

Posted on: Wednesday, 31 August 2005, 21:00 CDT

Sep. 1--Gasoline prices roared past $3 a gallon in many parts of Connecticut on Wednesday as the ripple effects of Hurricane Katrina continued to drive energy costs higher nationwide.

The milestone raised fears about the possibility of a cutback in consumer spending, as rising energy prices soak up money that would be spent on other goods and services.

The price spikes, following recent boosts in the cost of crude oil, highlighted the impact of Katrina's devastating rain and wind on parts of the country far removed from where the hurricane hit.

At least eight U.S. oil refineries were closed because of damage from Katrina. The interruption led some to project that gasoline prices could rise to $3.75 a gallon, or higher.

The spike -- one Stamford station was selling gasoline for $3.43 a gallon Wednesday, up from $2.74 a day earlier -- had drivers thinking hard about how far they travel and how much they spend to do so.

Scott Plecity, who refills vending machines throughout Greater Hartford, watched the pump closely Wednesday as he filled his tank at a Manchester gas station, where the price for regular jumped from $2.70 to $3.10 overnight.

Plecity stopped abruptly at eight gallons, less than a quarter of the van's 35-gallon tank. He said he will continue making small fill-ups in the hope that gasoline prices will come down. He paid about $25.

"This is ridiculous," Plecity said. "To fill my tank, it would cost over $100."

Despite the higher costs, Plecity said he can't cut back on his mileage because he needs to do his job.

Similar scenes were repeated throughout the state as drivers came face to face with the latest round of price increases.

Traditionally, consumers have been slow to change their habits in response to higher energy prices. Some on Wednesday did take the latest increases in stride, saying they wouldn't adjust their driving.

Dan DelMastro, who owns Aeromed Ltd., a medical supply firm in Glastonbury, said motorists in other parts of the world have coped with much higher gasoline costs, and Americans can, too.

He said his Mercedes 420S gets 15 miles to a gallon, and he can't see driving it less.

"What do you spend a year on gas, $2,000?" he said. "Say it's going to be $4,000. Does another $2,000 change your life? I mean, we've been spoiled forever. We should stop whining, be grateful for what we have and get used to what the rest of the world faces."

Not everyone has that luxury.

Irene George of Enfield, an attendant at one of the economy parking lots at Bradley International Airport, said her Pontiac Sunfire gets 22 miles to a gallon, and after work she loves to drive the state's back roads to view scenery. But she'll limit leisure driving from now on.

"Now I'm afraid to even go to a tag sale, so I'll just stay home," the gray-haired woman said.

Disruptions from the hurricane prompted President Bush on Wednesday to release oil from the U.S. Strategic Petroleum Reserve in order to keep refineries producing gasoline and other products.

Although higher costs worried consumers and businesses alike, experts said they saw little evidence of supply shortages in the Northeast. However, one area retailer who asked not to be identified said his normal daily gasoline allocation has been cut by 12.5 percent because of the damage caused by the hurricane.

Eugene Guilford, executive director of the Independent Connecticut Petroleum Association, said no one could rule out the possibility of temporary gasoline shortages, but he believes that supplies will be adequate for normal demand.

Elsewhere in the country, some wholesalers and refineries were restricting the amount of fuel that retailers could buy in an apparent effort to prevent hoarding of supplies. Isolated gasoline shortages have been reported from North Carolina to Arizona.

Grumbling about higher prices is clear everywhere, but nailing down how it affects everyday habits is murky.

Donald Klepper-Smith, an economist at DataCore Partners Inc., said he estimated that the average Connecticut household with two cars would spend an additional $2,000 to $2,500 during the next year heating their homes and running their cars and trucks if the existing price increases stick.

The money to pay those higher bills would almost certainly come out of discretionary spending for vacations, entertainment and holiday shopping, he said.

Even without the gasoline spike, American families at the middle of the economic scale have seen their incomes lose ground to inflation for four straight years.

"People are feeling the pinch in their pocketbooks right now, and a lot of people are asking: Where do I cut?' " Klepper-Smith said. "The rise in energy prices is, in effect, a tax that is siphoning off consumer spending power."

Higher energy prices will almost certainly pinch consumers harder when the winter heating season arrives and home furnaces kick in.

"The good news is that we're not in the heating season right now. This is a low-demand season in the heating period right now. Looking out into the heating season, absolutely customers are going to pay more," said Sandy St. Pierre, a spokeswoman for Yankee Gas, the state's largest natural gas distributor.

Bruce Deitch, vice president of Kasden Fuel, a heating oil dealer in East Hartford, said he was worried that some customers would have trouble paying the higher heating costs this winter.

"When I look at the price and the impact it's going to have on people's ability to pay, it's certainly a major concern. We're coming into the heating season, obviously. In just the last few days the prices have escalated 30 to 40 cents a gallon," he said.

Sales managers at auto dealerships in the Hartford area said car buyers already have become more sensitive to rising gasoline prices in recent months -- and crossing the $3 threshold is only likely to heighten concerns.

"People are definitely more aware of gas mileage now," said Paul P. Koldras, manager for new-car sales at Gengras Chevrolet in East Hartford. "It has moved up the decision-making process chart."

As gas prices climbed this year, sales of the popular Chevrolet Tahoe SUV, which was the top seller in Chevrolet's stable of SUVs, have slipped, Koldras said. Some customers are choosing to buy the smaller Equinox SUV.

The Tahoe gets 12 to 16 miles a gallon around town, while the Equinox logs closer to 18 to 20 miles, Koldras said.

Koldras said pricier gasoline is not the only reason Tahoe sales have slowed. The SUV has not been redesigned for several years, he said.

Car buyers also are showing greater interest in newly introduced hybrid cars, which are powered by gas and electricity.

Joe Marconi, general sales manager at Manchester Honda, said there has been growing interest in Honda's hybrid Accords and Civics. Marconi said he sold out of his 2005 hybrids in late May, and has orders for 2006 models through October.

But Marconi said the rising price of gas is only one reason to consider buying a hybrid vehicle. There is no sales tax on vehicles that get more than 40 miles to a gallon, and there are also federal tax credits for buying them, he said.

Marconi said he is still waiting for gas mileage to become one of the top reasons for buying a particular car.

"I thought it would come at $2 a gallon, then $2.50, maybe it will be at $3," Marconi said. "Maybe it will hit home when they next fill up at the pump."

Until recently, gas prices had not discouraged Ed Gomarlo from driving from his home in Winchester, N.H., to a sales job at C&S Wholesale Grocers in Windsor Locks. But with gas topping $3 a gallon, he said that making the 170-mile daily round trip in his 1992 Bonneville is costing too much.

"I am forcing myself to look for a job closer to home or I'm asking them to relocate me," he said. "I fill up three times a week, and it was fine at $2.35, but I paid $2.73 this morning and it's way beyond that now."

Gomarlo also said he is shopping for a more fuel-efficient car.

But for the well-heeled, the spike in gas prices is not likely to affect car-buying habits. At Crowley Chevrolet in West Hartford, sales of the newly introduced H3 Hummer have remained strong this summer despite rising gas prices. The H3s average 16 miles to a gallon around town and have a base price of $29,500.

Joe Breton, who was servicing the pumps at an Exxon station on Route 75 in Windsor Locks for Advanced Tank Testing Services Inc. of South Deerfield, Mass., said his employer has decided to replace the company's fleet of four Ford E-350 trucks with something more fuel-efficient.

The owner is considering diesel trucks designed to get 30 miles to a gallon, he said -- twice the mileage of the present trucks.

"Right now, the gas is killing us," Breton said. "Today filling up was $90-something. A month ago, $60. It's ridiculous."

Courant Staff Writer Ritu Kalra contributed to this story. Wire service reports are included.

By John M. Moran, Kenneth R. Gosselin and Paul Marks

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Copyright (c) 2005, The Hartford Courant, Conn.

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Source: The Hartford Courant, Connecticut

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