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Gas price hike leaves top analysts guessing

February 22, 2013


Ricky Tate has retired from Mississippi State University, but that hasn’t stopped him from taking up a private plumbing business with his brother, Kevin Tate. The price of gasoline, however, is slowing him down.
“It’s hard to get people to put up extra money for gas,” Ricky said. “That often ends up coming out of our own pocket.”

Smiling, Kevin then added, “We’ll be looking for a wagon and a mule if it goes any higher. That’s all we (will be able to) afford.”

Average gas prices in Mississippi have risen more than 20 cents in the past week and more than 45 cents in the past month, part of a nationwide gas price hike that even the industry’s top analysts are struggling to explain.

As of Thursday, reported a state average gas price of $3.64 per gallon, compared with $3.44 one week before and $3.18 one month before. The site also reported a national average of $3.73 Thursday, compared with $3.61 a week ago and $3.27 a month ago. Prices in Starkville reported on the site ranged from $3.59 to $3.72 Thursday.

Curt Crissey, owner of multiple BP stations in Starkville, said he could not explain the price increases, and neither could any colleagues he had talked to. He said he found it especially unusual that he saw no specific news items to point toward — no sudden increases in conflict in oil-exporting Middle Eastern countries or natural disasters destroying oil infrastructure.

“I’ve asked my suppliers; I’ve asked everyone I could ask,” Crissey said. “I can’t tell you. I really don’t know. Most people are going to tell you they don’t know.”

Gasoline retailers have minimal influence on the price of gasoline. The U.S. Energy Information Administration reports that 9 percent of gasoline’s price comes from distribution and marketing and 68 percent of it derives from the price of crude oil. As such, AAA spokesperson Don Redman said the two factors most likely to drive up gas prices were increases in crude oil prices or significant drops in gasoline inventory. Neither of these appeared to be the cause this time, he said.

“Crude oil has been vacillating between $95 and $97 per barrel. It’s high, but it’s been steady,” Redman said. “Right now, inventory of gas is slightly above average for this time of year. This is usually when you have significant drawdown on gas inventories. You’ll have scheduled closures of refineries where they perform important maintenance work.”

The drawdown also tied into the change of seasons, Redman said, because blends of gasoline used in the winter differed from those used in the summer. He said Environmental Protection Agency regulations required a different gasoline mixture for summer months that reduced air pollution, and the transition to these fuels typically happened in April and May, bringing with them the highest gasoline prices of the year.

So, he said he and other analysts were surprised to see such an increase in February, and they, like Crissey, struggled to pinpoint the cause.
“We’re at historic high prices for this time of year,” Redman said. “The run-up right now runs contrary to anything we’ve seen in the past. It’s unprecedented for this time of year to have prices run up this high without there being a significant war or disruption of oil lines or refineries going offline. That is what is confounding analysts.

Truthfully, (these increases have) many analysts scratching their heads.”
At this time, Redman said, AAA stood by a prediction by the U.S. Department of Energy that the national gas price average would peak at about $3.90 this year. He said it’s possible that the spring fuel blend transition could simply be starting early. If not, he said, the transition could drive prices even higher when it did arrive.

Consumers at Starkville’s gas stations reported varying responses to high gas prices. Emily Strickland, a freshman majoring in kinesiology at MSU, only filled up her car’s tank a fraction of the way, and she said it was because filling it completely was too expensive.

“I live on campus, so I don’t use my car as much. I just get (the gasoline) I need from time to time,” Strickland said. “You’ve got to save your money. I don’t have as much money to spend on things I want.”
Wes Gordon, a fundraiser for the MSU Foundation, said he saw no point in worrying about gas prices, because those prices would not change his travel needs.

“I’ve got to get where I’ve got to go. It is what it is,” Gordon said. “I’m not one of those people who’s going to drive 10 miles out of the way to save two pennies on gas.”

Robert Guy, like Ricky Tate, is a retiree who went into business for himself, hauling dirt as a construction contractor. The price of gas was bad for business, he said, but he, too, believed it couldn’t be helped. Guy is 72 years old, and he said he believed strongly in the importance of staying active in retirement.

“You’ve got to ride. At my age, I can’t just sit still and do nothing,” Guy said. “(But), if it gets up to $4 (per gallon,) I’ll have to leave the job alone and go fishing. To tell the truth, I’d get more enjoyment out of fishing anyway.”

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