Some valley gas prices hit $3.50 |

Some valley gas prices hit $3.50

Randy Wyrickrwyrick@vaildaily.comVail, CO Colorado
NWS Gas KA 2-24-11

EAGLE COUNTY, Colorado – In America, two things tend to be true about gasoline:One, it keeps getting more expensive.Two, we’re going to keep buying it.And as you do, you need to make promises to God and repeat like a mantra that you will not fuss at the kid inside the gas station. They don’t set prices.In fact, when gas prices skyrocket, a retailer’s profits fall to as little as three cents a gallon, says Grier Bailey, government affairs manager with the Colorado Wyoming Petroleum Marketers Association.In fact, sometimes they actually lose money on every gallon they sell.Retailers just cannot win, Bailey said.”If we’re too high, we’re gouging. If we’re too low we’re predatory pricing. If we’re all the same we’re colluding. Retailers really are in a no-win situation,” Bailey said.

Here’s how the circle works, Bailey explained.Gas stations buy gasoline from distributors. Distributors buy it from refiners. Refiners buy crude oil from extractors, the people who pull it out of the ground.Crude is traded on dollars worldwide.All commodity prices have been rising, including oil, pushed up by higher demand and a weakening dollar as compared to other international currencies.Institutional investors like pension funds and other big players are dumping dollars and moving into oil, gold and stocks as the search for security and higher returns on their investments.Oil prices also go up because of events in places like Egypt, which seems disconnected because Egypt doesn’t produce much oil, compared to its Arab neighbors, Bailey said.But, pump prices jump for reasons that have almost nothing to do with the economic laws of supply and demand. We have plenty.”There is no lack of crude supply. There’s no shortage anywhere in the country,” Bailey said. “Gas is so high because the market is going crazy.”Here’s why.Those same commodity speculators and institutional investors tend to buy crude oil futures as a hedge against uncertainty in other markets and other commodities, Bailey said.With unrest across the Middle East, speculators and investors are flocking to the security of oil, and that’s driving up the price of a barrel of crude.”Because refiners have to purchase oil in competition with pension funds and people who deal in commodities, they’re paying more,” Bailey said. “Refiners are just like everyone else, they have to buy crude from suppliers.”So, refineries are paying inflated prices for crude oil, and that means distributors and retailers are also paying higher prices.Which means you’re paying higher prices for gasoline.And March and early summer begins the driving season, Bailey said, so that which has gone up will not be coming down for some time.”In places like the Vail Valley, the problem is exacerbated because of higher costs to do business,” Bailey said.Gasoline prices were hovering around $3.50 a gallon Thursday in Edwards. It was selling for as little at $3.16 in Gypsum.

Gasoline dealers actually like it when prices are falling, Bailey said.When a gallon of gas is $2.50, they make about 10 cents a gallon because they’re replacing their current, more expensive gasoline with a less expensive shipment.”Gasoline dealers love it when prices go down. They’re buying their next shipment for less money than they’re selling it for right now,” Bailey said. “When the price goes up, their profit margin drops to 3 or 4 cents per gallon.”Any time oil prices spike to $70-$100 a barrel, the only people making any money are crude producers, the people who are taking the raw product out of the ground, Bailey said.

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