When will gas prices level in the valley?
February 27, 2014
EAGLE COUNTY — Rick Dilling fields the same question about this time every year: “What the heck is going on with gas prices?”
Dilling, the owner of the Shell station in West Vail, has the same answer just about every year: “It always goes up about this time every year.” The answer to the next question — “How much higher will it go?” — gets another honest answer: “I don’t know.”
Dilling said his supplier calls, tells him the price of fuel on the next truck coming and asks if he wants gas or not. The answer is yes, of course — that’s how he stays open. Dilling also said that despite the higher price of gas, he isn’t making any more money than he does when fuel is less expensive. In fact, he said, he makes less, since his rent is tied to his gross sales — higher sales means more rent.
The spike comes every year but has hit a bit earlier in the year since 2012 or so. But this year’s spike, which hasn’t yet peaked, is a bit less severe than the one that hit in 2013. According to AAA Colorado, average prices for this week in 2013 were about 5 cents per gallon higher.
Causes Of annual Spike
The annual spike is caused by a couple of things: Refineries generally shut down for several days this time of year for annual maintenance. The refineries also use those breaks to switch over to summer-fuel formulas. The combination puts a pinch on supplies, and prices respond accordingly.
Wave Dreher, of Colorado AAA, said this spike will probably last until late March or early April, followed by a plateau, or even a slight dip. Prices will then go back up starting in late May, for the summer driving season, then drop again after Labor Day.
As opposed to 2008, when oil prices skyrocketed in the last gasp of an overheated and ready-to-crash world economy, the price of crude oil has been fairly stable for some time, at around $100 per barrel. Barring any shocks to the global system — mainly war, terrorism or natural disaster — oil prices are expected to stay flat for a while, Dreher said.
Dreher said while the $4-per-gallon line isn’t something anyone wants to see, she added that previous price increases haven’t affected travel all that much. A quick trip to the calculator shows why.
A 1,000-mile trip in a car that gets 20 miles per gallon requires 50 gallons of gas. At $3.25 per gallon, the fuel cost for that trip is $162.50. Adding a dollar to the price of gas means an extra $50 in fuel costs — not chicken feed, but not a trip-killer, either.
Dreher said AAA Colorado’s research shows fuel costs may prompt people to cut a day off their trips, but they’re still hitting the road.
While the annual fuel price spike is unpleasant — especially for those of us with more fuel-hungry vehicles — there may be some good news on the horizon.
Gregg Laskoski is a senior petroleum analyst for GasBuddy.com, a nationwide website and free app that finds the lowest- and highest-priced fuel throughout the country. Despite the annual price increase, Laskoski said GasBuddy actually expects Americans to pay less for fuel this year than they did in 2013.
Part of the reason is people driving less as they get older. But part will be less-expensive crude oil reaching refineries throughout the country.
“We’re seeing more Canadian crude coming,” Laskoski said. “In Colorado, you’re seeing more crude from the Bakken formation (part of which is in northeastern Colorado). It’ll be interesting to see how that all plays out.”
Laskoski said despite annual price increases, the average price of gas nationwide dropped 10 cents per gallon from 2012 to 2013. GasBuddy expects another 10-cent drop this year.
That drop may continue as more oil from this country, Canada and Mexico hits our refineries. In the meantime, $4 gas is here for a while to come.