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Expect Gas Price Break, Unless...

Posted on: Thursday, 8 September 2005, 12:00 CDT

Sep. 8--Barring more catastrophic weather, consumers can expect gasoline prices to fall in the coming weeks thanks to a decline in the price of crude oil. But prices at the pump may not come down as fast as many consumers would like.

While gas and crude prices shot up after Hurricane Katrina, prices at the pump are taking longer to fall back to earth than a barrel of oil. Still, down they will come, some analysts expect, perhaps as much as 30 cents per gallon in the next month or so.

"It does take some time to work through the whole system," said Denton Cinquegrana, markets editor with Oil Price Information Service in Wall, N.J.

Crude oil for October delivery fell $1.59, or 2.4 percent, to close Wednesday at $64.37 a barrel on the New York Mercantile Exchange, down from a record-high $70.85 a barrel on Aug. 30.

Not so with gasoline. The average price of regular unleaded gas in the Tampa Bay area continued to rise, climbing from $2.58 on Aug. 30 to a record-high $3 on Wednesday, according to AAA.

Crude-oil and gas prices usually move in synch because crude accounts for about 55 percent of the price of a gallon of gas, according to energy economist James Williams, president of WTRG Economics in London, Ark.

But oil-refinery closings due to Katrina mean that distribution and refining costs will temporarily make up a larger portion of the cost of gas, Williams said. And that will slow the beneficial effect of falling crude prices from reaching consumers.

As more refineries come back on line and gas imports increase from overseas sources, the expanding supply could enable prices at the pump to fall by about 30 cents a gallon over the next month, Williams predicted.

Williams added that his projection assumes that the Gulf of Mexico won't be hit by another damaging storm.

State officials reported Wednesday there were more than 155-million gallons of fuel in Florida ports, with another 143-million expected in the next three days.

Fuel supply included an infusion of more than 840,000 gallons Tuesday in the Panhandle, drawing accolades from Gov. Jeb Bush, who said the fuel arrived "just in the nick of time. Northwest Florida was almost bone dry."

Bush said Wednesday that he has been pleased with the oil companies' cooperation in the wake of Katrina. "I think the oil companies have been significantly more responsive to our urgings and suggestions and requests this year than before," he said.

The Port of Tampa has seen an increase in gas shipments, mostly from Texas, port spokeswoman Lori Musser said.

Meanwhile in Tallahassee, any government-imposed relief from high gas prices seemed iffy.

Bush said he is considering asking the state Legislature next month to consider a tax break on gasoline. But both Bush and Senate President Tom Lee also indicated they may not act if increased fuel supply lowers prices.

Bush is expected to call a special session in October to deal with a proposed change in Medicaid, which provides health care for the poor and disabled. It's possible a gas tax break, which is also being pushed by Democrats, could be added then, he said. Floridians pay 22.5-cents per gallon in state taxes.

"The question is where will (the price) plateau?" Bush said. "My guess is it will plateau at a higher rate than most people are hoping for, so therefore it may make sense to continue discussion about some temporary relief."

But Lee wasn't nearly so committed. He has instructed the Senate staff to look at the economic impact of such a break as well as the anticipated long-term supply.

"The president is sympathetic to fact that we got people paying at the pump who are really hurting," said Kathy Mears, Lee's spokeswoman. "But he also wants us to do our homework and be a little bit cautious. We're still in the middle of hurricane season."

By Louis Hau and Joni James. Information from Bloomberg News was used in this report.

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Source: St. Petersburg Times

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