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Gas pains to increase

Cliff Thompson
NWS Gas Prices1 3-22 CS Vail Daily/Coreen Sapp
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If you like or have to drive a fossil-fuel-powered vehicle, you’re not going to like this news.

Gasoline and diesel fuel prices are sprinting toward the highest prices ever notched at the gas pump. In some places across the country, like the West Coast, it’s hitting more than $2.55 a gallon for regular and nearing $3 for premium grade and the price is expected to increase.



Closer to home the price per gallon of regular in the east end of the county is approaching $2.20 and $2.30 for premium. That’s up nearly 15 cents a gallon in the last week. But those prices won’t hold long – they’re likely to increase.

In the high-demand urban markets of the East and West Coast, experts are predicting prices per gallon for premium grade fuel approaching $3.50 a gallon. Any day now, Colorado’s highest average price per-gallon, $1.82, notched June 5, 2001, will only be a footnote as the second-highest price ever. The national average Tuesday set a new record at $1.74 a gallon.



There is cause for a tiny bit of optimism: Fuel prices in Eagle County aren’t expected to peak at the same levels as those on the West Coast. How high they will go here is a matter of speculation.

Cost of living



The spike in fuel prices is going to cost you more to do nearly everything, from running the kids to soccer practice, having a pizza delivered or going out for dinner.

“It ‘s a huge part of our costs every year. We had to raise our prices just to offset fuel increases,” said Darryl Bangert of Lakota Guides in Eagle-Vail, referring to his motorized guided tours.

It’s easy to vent your fuel-price -fueled frustration by cursing out oil conglomerates, gas station operators or the conspiracies of the OPEC countries in general, but the expletives might miss the target.

Surprisingly, the pain caused by rising prices has spread beyond the consumer. Eagle Amoco owner Ed Oyler said business gets tougher for him with there are rapid price increases.

“Our margins are usually quite a bit thinner when the price is high,” he said. “You have a harder time. Everybody is so reluctant to move (prices up).”

China’s consumption

Why is fuel getting so expensive? There are a number of reasons that you’d read about in any Economics 101 course – with a smattering of geopolitics.

Demand or shortages drive prices upward. It’s that simple. Price increases have also become a seasonal ritual as the summer “driving season” begins. But there are other factors. Price spikes in fuel are seen in both the spring and fall, experts said.

“There are a number of factors coming together at the same time that make (gas prices) very volatile right now,” said Bryant Gimlin of Gray Oil Company, a Denver-based petroleum wholesaler. “Most notable is there’s very little supply – and record demand.”

Part of that demand, said Colorado AAA’s Mary Greer, comes from a cold winter on the East Coast that caused refineries to produce more heating oil than gas this year. The start of the spring and summer travel season also coincides with the transition period when refineries convert their operations from heating fuel to automotive fuels.

That transition also includes manufacturing and distributing a number of different mixes of gasoline, Gimlin said. California’s gas is a different mix than Colorado and some states ban specific gasoline additives allowed in other states.

On top of that, an increasingly thirsty and capitalist China this year has been purchasing nearly double the volume of fuel that was forecast. The refineries can barely keep up with the demand.

“China is driving it,” Gimlin said. “Their economy is on a tremendous upswing. They’re buying everything. The U.S. is a good place to buy.”

While that may be good news for multinational U.S. businesses, it’s not for consumers here. With a weakened dollar, imported goods such as oil are more expensive.

“That means the U.S. has to compete in the global market,” said Greer.

It becomes a vicious cycle when you consider that petroleum products are valued on the now weakened U.S. dollar, said Gimlin.

“OPEC tries to justify a higher price because of the weaker U.S. dollar,” he said.

Adding to the expensive mix is the lack of refinery capacity.

“The fact that the U.S. is short on refining capacity means we have to rely on imported products,” Gimlin said.

There are half the number of refineries now than there were in 1970, Greer added.

“There hasn’t been a new refinery built in 25 years,” she said.

Political unrest

Crude oil prices are at $38.30 per barrel, the highest level since the 1990 war with Iraq when they temporarily soared to $58 a barrel. Analysts expect the per-barrel price this spring to hit $40 or more. What that will do at the gas pump remains to be seen.

South of the border, uncertainty over the political and labor unrest in Venezuela, which supplies 15 percent of U.S. petroleum, may also affect gas prices here, Greer said.

The U. S. and Colorado imports 65 percent of its energy. Gimlin said the U.S. uses 9 million barrels of gasoline – 378 million gallons – per day.

OPEC, the Organization of Petroleum Exporting Countries, is threatening to cut production April 1, Greer said. If that occurs, the price of fuel could spiral even higher.

Cliff Thompson can be reached via e-mail at: cthompson@vaildaily.com or by calling 949-0555 ext. 450.

Drivers can ease fuel strain

Consumers can blunt the impacts of the sharp price increases in fuel.

Colorado AAA recommends drivers make sure your vehicle is properly tuned so it is running efficiently; that includes making sure your tires are properly inflated as under-inflated tires rob gas mileage.

Drivers should also limit trips by combining the commute to work with running errands. There’s also the opportunity to carpool, which could cut travel expense in half.

In the average household, 40 percent of the fuel expense comes from commuting, Greer said. “If people do a few little things and use their cars more efficiently, demand will drop and will help the industry shave its demand,” Greer said.

If each of the 130 million vehicles in the U.S. saves a gallon of gas, that’s 130 million gallons or an amount equal to the crude imported in a month from Kuwait. On April 22, Earth Day, the AAA is promoting saving a gallon of gas a day.

But even gas station owners have their suspicion about why there is a shortage.

“It’s all supply and demand,” said Eagle Amoco’s Oyler. “I think they make the shortage.

– Cliff Thompson

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