Gas Prices to Top $3 This Week

By Joe Walker, The Paducah Sun, Ky.

Sep. 28–Motorists should expect gas prices to jump above $3 a gallon by the weekend because of Gulf Coast refinery disruptions from Hurricane Rita, a regional distributor says.

“Nobody needs to rush to the pump,” said Phil Russo, executive vice president of Max Arnold & Sons in Hopkinsville. “That just puts more pressure on the market.”

Russo thinks gas will increase an average of about 10 cents a day into the weekend. Regular unleaded gas was under $2.70 a gallon earlier Tuesday at many stations in Paducah, but Russo said the wholesale cost had jumped to about $2.90. His firm operates several BP stations in the Paducah area.

Despite huge price swings, most retailers are selling at or below cost, Russo said. Retail profit margins are typically a few cents per gallon.

He said motorists can help most in the short term by driving less. Long-term, the solution is to increase refining capacity, but more importantly to develop other fuels, Russo said.

“My whole goal is to reduce dependency on foreign oil,” he said. “What better alternatives do we have in this area than corn and soybeans?”

Russo’s firm will add E-85 (a blend of 85 percent ethanol and 15 percent gasoline) on Oct. 5 at one of its Hopkinsville stations. He said the only other station selling E-85 in Kentucky is in Louisville. The fuel will be supplied by Hopkinsville’s Agri-Energy ethanol plant.

To give drivers incentive to buy, E-85 will be priced temporarily at 50 cents a gallon below regular gas, Russo said.

Both E-85 (made from corn) and biodiesel (made from soybeans) are sold at Metropolis Citgo at 1117 E. 5th St. in Metropolis, Ill. E-85 sales have dropped about 40 percent in the past month, while biodiesel sales have remained steady, tracking a 5 to 7 percent increase this year, said Chuck Knapp, vice president of operator Knapp Oil Co. of Xenia, Ill.

Knapp said biodiesel prices have been more stable than ethanol, and he attributed the E-85 sales slump to retail prices that jumped along with gasoline. Just two months ago, E-85 sold at the Citgo for 36 cents a gallon less than regular gas.

“It may cost a little less than gas now, but not enough to give people incentive,” he said.

While E-85 can be burned in only a few newer vehicles, E-10 (containing 10 percent ethanol) is a universal fuel that proponents say has advantages over gas, notably higher octane. Super Valu stores in Paducah added E-10 about five months ago, and the price until recently was a few cents cheaper per gallon than regular gas, said Dale Farley, general manager of store operator Banks Grocery Co.

“We did it to pass a little bit of savings along to our customers,” he said. “After gas has gone up as much as it has in the last few months, the difference in the price of it and blended gas has gotten smaller and smaller.”

Demand for ethanol in urban areas with mandated blended gas has driven up the price, said Mick Henderson, general manager of Agri-Energy. The small plant ships a considerable amount of ethanol to Louisville, where blended gas is required.

“Our ethanol is particularly susceptible to those price swings,” he said. “You’re seeing huge drawdowns in ethanol across the country.”

Andy Sprague, who produces B2 (a blend of 2 percent biodiesel fuel) on his farm in Sturgis, said sales “never missed a beat” through hurricane-related gas shortages and price spikes. His only problem was competing for distribution trucks that were waiting in line at terminals to get gasoline.

“I’m booked out through the month of October,” Sprague said. His small Union County Biodiesel plant, which opened in January, will reach 2 million gallons of production early next week.

He sells to Mid West Terminal, a Paducah wholesaler that supplies a relatively few local biodiesel retailers. One is Kentucky Tobacco Outlet at 3821 Hinkleville Road. Owner Bob Hill said overall diesel sales have risen about 12 percent since he added biodiesel in March.

“The store pays 1 to 2 cents more for biodiesel than diesel, but I try to stay competitive at the pump because I’d like more people to try it,” Hill said.

He said biodiesel can be burned in diesel engines, but burns more cleanly and efficiently than diesel.

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