Oil prices drop, but not gas - East Valley Tribune: Business

Oil prices drop, but not gas

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Posted: Thursday, March 20, 2003 10:37 pm | Updated: 1:40 pm, Thu Oct 6, 2011.

Crude oil prices have fallen sharply recently, but gasoline prices have yet to show any signs of coming down because of a strong demand and short supplies, analysts said.

Arizona’s gas prices inched closer to $2 per gallon this week, continuing to break record highs, according to AAA Arizona. The organization’s weekly fuel survey shows the statewide average cost for self-serve regular unleaded gasoline at $1.92 per gallon, up 14.8 cents from two weeks ago.

This week’s average price is nearly 64 cents higher than last year’s fuel average of $1.28 per gallon. Arizona’s average pump price is 20 cents higher than the national average of $1.72 per gallon.

Meanwhile, over the past three weeks, prices for U.S. light, sweet crude oil have dropped sharply from their post-Gulf War high of $39.99 a barrel reached on Feb. 27. On Thursday, the price fell to $28.61 for April contracts, down $1.27 from the day before.

Even though oil prices appear to be retreating, fuel prices continue to climb nationwide because of tight supplies, experts said. “There’s no need to worry, but are prices going to plummet anytime soon? No,” said said Laura Rightenburg, AAA spokeswoman. “I would anticipate, and I hope I’m wrong, that gas would continue to stay above the $1.70, $1.75 mark well into the summer only because of all those situations that have been playing into our prices the last couple of months, and then you’re topping it with high demand for travel.”

On the futures markets, prices for crude oil and gasoline for delivery in April and May are going down. But earlier this week, the Energy Information Administration, the statistical arm of the U.S. Energy Department, predicted prices would continue to climb because of tight supplies and high crude costs.

Jefferson Pals of Chandler, who was filling up at Exxon at Alma School and Elliot roads in Chandler, didn’t like the argument. “It’s kind of suspicious to me when oil prices go down but gas prices here keep going up,” he said.

But he said he didn’t think prices would continue to rise drastically like they have been. “I think they’ll stay around where they are for a while.”

Bill Bush, American Petroleum Institute spokesman, said lower oil prices don’t always translate to lower gas prices.

“We don’t know,” he said when asked if pump prices will decrease. “All we can say is crude oil prices and gasoline prices generally track, but sometimes one gets out ahead of the other.”

As an example, oil prices started rising in November, but gas costs went down a few weeks after the spike and didn’t begin climbing until December, Bush said.

Several factors are affecting demand, especially in the Western U.S., Rightenburg said. Refineries will switch from producing winter blends to summer blends at the end of the month so they have less stock on hand, she said. Also, more people are expected to drive this summer than normal, especially if the war with Iraq continues.

“We will see a surge in domestic travel, tourist-friendly cities such as San Francisco, New Orleans, Boston, and national parks,” said AAA travel director George Howell. “Popular destinations outside the continental U.S. will include cruises and tours to the Caribbean, Alaska and Hawaii, as well as Mexico, Canada and Australia.”

Last year, nearly 89 million people, or 85 percent of travelers, hit the road during the summer holidays, making personal vehicles the most popular form of transportation for vacationers. Unrest abroad and renewed patriotism led to a growing support for U.S. destinations, AAA said.

The top vacation spots last summer included Orlando, Fla., Las Vegas, Nev., Yosemite National Park, Calif., and the Grand Canyon, AAA said.

Even with the number of people taking to the highway, there will be enough gas to go around, Rightenburg said.

“President Bush has indicated he’ll release strategic petroleum reserves if necessary,” she said. “We’ve already heard reports from analysts that say Saudi Arabia has been stockpiling crude oil. It’s there. That’s why you’ve seen the decrease (in oil prices) the last couple days. Now, it’s a matter of getting it to us.”

She said conservation is key, including tuning up vehicles to get better gas milage. “Some of the things we’ve been saying are so common sense, yet some people are just so busy and distracted by these world events they just don’t think about it,” she said. “If you have two cars and one is an SUV and one is a compact car, whoever is driving the farthest to work needs to be using the compact vehicle.”

In the continental United States, AAA found the most expensive average price in California at $2.18 a gallon.

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