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Gas pains from high prices at the pump

By JONATHAN FAHEY and SANDY SHORE
February 28, 2011

Juan Zuniga gasses up a SUV in Dallas. Gasoline prices rose more than 2 cents on Thursday to a new national average of $3.228 per gallon. (AP Photo/LM Otero, file)

High fuel prices are putting the squeeze on drivers’ wallets just as they are starting to feel better about the economy. They’re also forcing tough choices on small-business owners who are loathe to charge more for fear of losing cost-conscious customers.

Gasoline prices rose 4 percent last week to a national average of $3.29 per gallon. That’s the highest level ever for this time of year, when prices are typically low. And with unrest in the Middle East and North Africa lifting the price of oil to the $100-a-barrel range, analysts say pump prices are likely headed higher.

Bryon Gongaware, an owner of The Floral Trunk and Gifts in White Bear Lake, Minn., didn’t raise his $7 flower delivery charge when gas prices spiked in 2008, and he doesn’t plan to do so this time, either.

“I don’t think the economy is solid enough that you can be careless about raising prices,” he said, standing among the flower clippings on the floor of the shop he has run for 21 years.

That means the extra costs that come from driving the store’s delivery van 70,000 miles a year come from only one place: “right out of the bottom line,” he said.

For drivers such as Robert Wagner, 51, a high school teacher from Thornton, Colo., the higher fuel costs mean cutting back on movies and dinners out for him, his wife and their two children. “We’re very, very frugal right now,” he said as he trickled enough $3.09-per-gallon gasoline into his Chevrolet Suburban to get him to his next pay day.

Analysts and economists worry that by lowering profits for businesses and reducing disposable income for drivers, high gasoline prices could slow the recovering economy.

Over a year, analysts estimate, oil at $100 a barrel would reduce U.S. economic growth by 0.2 or 0.3 of a percentage point. Rather than grow an estimated 3.7 percent this year, the economy would expand 3.4 percent or 3.5 percent. That would likely mean less hiring and higher unemployment.

Americans are less prepared to absorb the spike in gasoline prices than they were the last time prices rose this high, in 2008, because unemployment is higher and real estate values are lower, says David Portalatin, an analyst for the market research firm NPD Group.

It has been four months since gasoline rose beyond $3 per gallon. During that time, drivers have spent $14 billion more on gasoline than they did a year ago, Portalatin says.

Diane Swonk, chief economist at Mesirow Financial in Chicago, says this year’s cut in payroll taxes offers consumers a buffer against higher fuel prices. Still, she expects all but the wealthiest Americans to cut back on discretionary spending. And the longer prices stay high, the more damage they do.

Gasoline prices rose throughout last fall as the developing nations of Asia and the recovering economies of the West began using more oil.

In recent weeks, upheaval in the Middle East and North Africa stoked fears that oil supplies would be disrupted, and oil prices exceeded $100 per barrel for only the second time in history.

Much of the most dramatic unrest took place in countries that are not big producers of oil. But when Libya plunged into chaos, there were disruptions in shipments of its high-quality crude, which is well-suited to making gasoline. That sent refiners scrambling to find other sources of high-quality oil. Gasoline prices rose further.

Gasoline prices typically fall in the winter and rise in the spring as refiners switch to more expensive summer blends of gasoline. Since 2000, prices in May have been 52 cents per gallon on average higher than in February, according to the Energy Information Administration.

Tom Kloza, chief oil analyst at the Oil Price Information Service, believes that the normal seasonal rise in prices has been pulled ahead by events in the Middle East, but he still expects prices to rise further. He predicts prices will reach $3.50 to $3.75 per gallon, barring more chaos in the Middle East.

“When we get over $3.75 we are looking at very serious consequences for the economy,” he says.

For every 25-cent increase in the price of gasoline, the nation spends an extra $3 billion filling up its cars and trucks, Kloza says.

For Jay Ricker, who owns 51 convenience stores in Indiana that sell gasoline under BP and Marathon brands, that’s less money for the “affordable luxuries” he offers — cappuccinos and candy bars that people enjoy, but can do without. “I hate these high prices,” he says. “People don’t want to come in and buy something I make money off.”

Drivers often get angry when gasoline prices spike for reasons that aren’t apparent, such as refinery problems or overseas demand for oil.

This time, though, the dramatic news reports from the Middle East are making customers more understanding, says Scott Hartman, CEO of Rutter’s Farm Stores, which owns 56 convenience stores and gas stations near Harrisburg, York and Lancaster, Pa.

“Whenever you see chaos in the Middle East, people expect higher prices, and this has been more widespread than most of us have seen in our lifetimes,” he says. “It’s quite clear our customers know what’s going on.”

That doesn’t mean they like it.

When asked about fuel prices at a RaceTrac service station in Dallas, Shaun DuFresne tapped the screen on the pump, showing he had just spent $90.14 for diesel — at $3.50 a gallon — to fill his 2006 Ford F-250 pickup truck. Then he said something unprintable.

___

AP Writers Joshua Freed in White Bear Lake, Minn., David Koenig in Dallas, Andrew Duffelmeyer in Winterset, Iowa and Terry Tang in Phoenix contributed to this story. Sandy Shore reported from Thornton, Colo.

Copyright © 2011 The Associated Press

15 Responses to Gas pains from high prices at the pump

  1. Fivebyfives

    February 28, 2011 at 12:04 pm

    Every time this happens there is the usual bitchfest, then like grief, we slide into a state of acceptance. The economic damage done is far greater than the D.C.-Wall St. corridor imagines, but the narrative manufactured is the one Americans are left to deal with.

    Heaven forbid an actual leader emerge (the usually live in the White House) to focus the nation’s abilities in an effort to reduce if not eliminate the impact of oil on the world’s economies. In this I may be called a socialism-capitalist. JFK did this with his proposal that led to the Apollo program in 1961. The government spent a boatload of money, and the resultant techologies made billions for many (just ask Bill Gates).

    Oil companies are not evil. True, they are as cunning as an outhouse rat. But that is normal for business behavior, i.e., altering whatever possible in order to return profits to shareholders. More power to them IF the national security is not adversely affected. Over time the “oil” companies need to transform into energy companies, and not primarily focused on fossil fuels. Or, new companies may evolve..either way, this cannot be done via “market forces.” Sometimes the well has to be primed

    The left and the Gorebots insist that we revert to the stone age asap so as to save mother earth from the parasitic species known as homo sapiens. Aside from the fact that people sitting in the dark carving figurines from carrots to sell to tourists is not a viable economic model, there is a defeatist and resigned mentality to this. Learning to “live with less” sounds wonderfully utopian, because it is.

    Any economy depends upon a cheap and plentiful supply of energy. For a leader (who usually lives in the White House, by the way) to set a goal that within ten years we will have a working, commerically viable fusion reactor would truly set the nation on the path to energy abundance and independence. Naturally, the status quo would object as it would be perceived as being in conflict with current economic interests, just like years ago some people were suspicious of jet aircraft because they had no propellers.

    It would require imagination; it would require grit and courage. And it would require sacrifice from everyone in order to bring that light in the distance that much closer. It’s a much better vision than consoling everyone about surrendering to the dark.

    • Carl Nemo

      February 28, 2011 at 12:56 pm

      Good points Fivebyfives unforltunately we don’t have that man in the White House. Obama never seems to seriously weigh in on any issues, but flip flops about on the edges. He’s a professional ‘campaigner’ ; I.E. a party apparatchik…period!

      Here’s a .pdf concerning gasoline taxes. The average tax per gallon between federal and state nationwide is 48.1 cents per gallon with diesel at about 52 cents. Based on the fact that commodities inflation is alive and well with the Fed’s printing of U.S. dollars in astronomical proportions, gasoline is headed alot higher and could reach $5.00 gallon by summer regardless of supply vs. demand.

      http://www.api.org/statistics/fueltaxes/upload/Gasoline_Diesel_Summary.pdf

      This isn’t necessarily bad because it will cool consumption which will lead to lower prices towards the fall, but not as low as before. Each one of these campaigns to higher prices leaves the new benchmark price somewhat higher.

      Carl Nemo **==

      • Fivebyfives

        February 28, 2011 at 5:34 pm

        Carl: I disagree to the extent that price spikes are necessarily bad. If one accepts the premise that businesses need to have a clue what the level of regulation/cost is going to be via government, then the same logic applies to consumers when it comes to energy.I have little doubt that the price spikes of 2007-08 contributed to the economic collapse.

        I think what I’m trying to say is that the “real” America is much less affluent than the Corridor Crowd thinks it is. There is not the resilience to withstand the rug being yanked out from under the little people.

        But, I suppose when the man in the White House (which is where a leader is normally found, by the way) hears that the masses can no longer afford gasoline, he will fecklessly quip, “Then let them use ethanol.” :)

        • Carl Nemo

          February 28, 2011 at 9:47 pm

          Good thoughts and I respect your difference in opinion. I personally think farmers and those engaged in our food production should get treated far better on fuel pricing relative to taxes than the average John and Mary Q. citizen who for the most part waste a lot of fuel other than going to work or perpetual “mall ratting”, shopping etc. I’ve always planned my route and my mission when having to shop, so too my wife for more effective use of fuel and have done so my entire life long before any current projected shortfalls. I loathe wasting resources especially freshwater. Of course not having kids along with the connections involved thereto, it may be far easier for me to downplay the cost of fuel issue. I’ve also always driven fuel efficient cars such as Honda Civics, Toyota Corolla’s etc. We have an older Dodge Caravan which we use a a a hauler, but generally it’s parked putting less than a thousand miles a year on the vehicle.

          Diesel taxes are far too high and its that type of engine used most in large scale farming, construction and product transportation. For years it was always cheaper than gas and its also lower on the “crack” in terms of refining compared to the higher volatiles such as gasoline, solvents etc. so it doesn’t take as much energy to produce diesel. It will even cost less when newer algae, biomass, coal gasification/synfuel production etc. become more common. I’m also for our government to get with the program and encourage large scale hemp farming nationwide which has negligible THC, almost unmeasurable quantities wiithin the plant structure. Hemp production could very well bring our nation out of our current “death spiral” to financial destruction. The oil from hemp can be used in diesel’s either pure or as as a cut for regular diesel fuel.

          Ethanol from corn etc. is a bad way to go. For one thing it’s freshwater intensive in the process, so they locate many of the plants near the Great Ogallala underground acquifer in the Midwest or the idea of piping Great Lakes water to the production facilities both of which are experiencing a draw down at this time. The nation is headed for a freshwater crisis as of now. Ethanol is produced largely in Brazil, but with the Amazon River drainage, rainy seasons which are intense and lower populations they can afford the ‘luxury’ of using freshwater in industrial processes without concern at this time. It currently takes six gallons of freshwater to produce one gallon of ethanol at a nominal production cost of of $1.74 per gallon. A 50 million gallon ethanol plant uses about 400,000 gallons of freshwater per day. One acre of corn transpires 4000 gallons of water through their plant structures daily…ouch! In addition it takes 120,000 btu’s of energy to produce a gallon of ethanol while the amount of btu’s in a gallon of gasoline is an average 112,000 btu’s per gallon across all fuel formulations. So ethanol production is nothing but a government sponsored ‘welfare’ program for Midwest farmers. Only a corrupt, paid off crimpol would jump on such an idea to fill the shortfall of easy to extract oil from the Middle East and elsewhere.

          This Wiki article concerning freshwater will give people an idea of our impending crisis just the same as for oil when “peak oil” hits and beyond.

          http://en.wikipedia.org/wiki/Water_resources

          Carl Nemo **==

          • Carl Nemo

            February 28, 2011 at 9:49 pm

            In addition here’s a link to gasoline per gallon energy equivalents in other forms of fuel. It’s quite interesting and give people perspective concerning substitutes for gasoline.

            http://en.wikipedia.org/wiki/Gasoline_gallon_equivalent

            Carl Nemo **==

  2. woody188

    February 28, 2011 at 9:35 pm

    Libya accounts for less than 1% of US oil imports, and prices were already up nearly 30% before the trouble started there, so try again AP. They haven’t the guts to tell the truth that speculators are driving up the priced based based on a commodity bubble created by TARP funds via Wall Street bankers and a dollar collapse via the Federal Reserve QE and QE2 programs.

    The market has come unhinged from reality. US supplies are at record all time highs, and the price still increases. Reform the market and take the speculators out, allowing only those that take delivery to bid on price, and then we’ll have a realistic price per barrel. Until that day arrives, we’ll pay double and triple what we really should be paying for fuel.

    Wall Street banks and oil companies will make record profits and the rest of us will suffer, perhaps collapsing the economy once again. Too big to fail? More like too big to save!

    • Carl Nemo

      February 28, 2011 at 10:07 pm

      Spot-on commentary Woody concerning the phony linkage of the LIbyan crisis with the price of fuel. It’s the cheap, freshly printed money courtesy of our ‘Counterfeiter in Chief at the Fed, Ben Bernanke and his Treasury accomplice “Timmy Geithner” that are responsible for the ‘easy money’ that’s migrated into the hands of speculators ‘again’ such as Goldman Sachs, fund managers on Wall Street etc. that are causing a synthetic price push on all commodities due to their laying on of beaucoup contracts in the Futures markets. Peoples of the world are suffering due to this ongoing, unchallenged criminal conspiracy (RICO) in high places of our government. Obama acts like a “visitor’ in the White House and seemingly could care less about the suffering being wrought on his watch by these gangster thugs with MBA’s in ‘pirate capitalism’ run amok.

      The same thing had happened up to the bust in 2008 when oil had reached $140 bbl. Once the so-called crisis hit due to another of their scams going bust; ie, CDO bundling and the selling of bad debt, then they had to “unwind” their massive contract positions in oil and its derivatives’ contracts, causing the price to slump bigtime. These arch financial criminals have seemingly taken over the U.S. government via a soft, financial coup are using U.S. taxpayer “debt dollars” to screw the American people bigtime.

      Btw, I watched the Jesse Ventura “Conspiracy Theory” airing where he confronted these slick, greasy looking characters that were linked to the CDO debacle. It looked like a gathering of Capone & Co in the 30’s; I.E., a bunch of guys with five o’ clock shadows and an excuse for everything they do in in every way. Self interest is their guide for living along with the attitude…”I’ve got mine, screw you”. Yep, all pirate capitalists to the core. I know what needs to be done with them, fortunately for them, they aren’t pulling this crap off in “Red China”. They know how to deal with corporate corruption and criminals such as these. : |

      Carl Nemo **==

      • woody188

        February 28, 2011 at 10:48 pm

        Yeah, I caught that episode. That whole meeting was BS and was just for ratings. It wasn’t real.

        I don’t know why they would allow rich men to bid up the price of something we all use when they never intend to actually buy the item. That’s like an auctioneer using an employee as a plant to bid up the price of an item. It shouldn’t be illegal, but here we are, forced to live with less so they can have more.

        I don’t idolize China and their system, keep in mind these are the people that forced millions off their land and flooded and drowned those that refused to leave to create the Three Gorges Dam. Also, ultimately all businesses lead back to the State and the Communist Party in that nation. They are either funded by or outright owned by them. US businesses have to have a Chinese “partner” which is really the Communist State, to enter that nation

        I always ask people to name one invention that came from China in the last hundred years. (I did finally find a hybrid rice called “oriental magic rice.”) Compared to other industrialized countries it’s apparent the Chinese mimic and steal other ideas, they do not innovate. (Google “Chinese company logo” and check out the knock-off logos they use.)

        We need some common sense reforms (such as actually taking delivery of goods) in our market for stability. Unfortunately, there’s nothing common about common sense anymore. I don’t hear anyone calling for this type of reform.

        • Carl Nemo

          February 28, 2011 at 11:32 pm

          When I reference “Red Chinese” justice concerning corporate thugs it doesn’t men I approve of Chairman Mao and his partisan henchmen liquidating millions of peasants and intellectuals for an ideology during the various ‘purges’.

          Justice in our nation is failed to non existent at least for the the upper five pecent that now own and control 28.2% of the nation’s wealth! That’s why there’s nothing to stop them from continuing on business as usual.

          Concerning the Chinese policy of forcing foreign business interests to have a “partner’ makes good sense to me. Mexico does the same and I’m sure there are many other nations too. America is ‘for sale’ 24/7/365 all for a few dollars, euros or shekels more. At least the Chinese still have a sense of nation and aren’t kowtowing to the interests of “Globalists ‘r Us” that seem to have the U.S. jerked up by its shorthairs so to speak. If anyone ends up running the global show it will be the PRC…period!

          Sorry you felt that way about the Ventura airing. Obviously these guys wouldn’t have shown up and allowed to be caught totally off guard, but just the same they are some of the ‘players’ and Jesse had a discussional with them. I found their attitudes and apologias for what Goldman does along with the obscene compensation compared to sports figures quite fascinating. They surely are full of themselves. The average U.S. based CEO earns 400 times what their lowest paid employees make and in some cases much more so into the realm of hundreds of millions per annum.

          Thanks for your thoughts on the subject.

          Carl Nemo **==

    • griff

      February 28, 2011 at 10:45 pm

      That’s exactly right. If every one will recall, at the height of the “economic collapse,” gas prices plummeted to around $40.00 per barrel. The reason was that speculators were cash-poor. They couldn’t speculate prices up, and the free market took over. A soon as the bailout funds came through, prices again rose.

      This is utter bullshit. You are being raped. Plain and simple. There is no market-driven pricing. Supply and demand have nothing to do with any thing.

      You are being raped. You are being lied to on an hourly basis. Wake up already.

      • Carl Nemo

        February 28, 2011 at 11:34 pm

        Thanks Griff for your concurrence on this subject. : )

        Carl Nemo **==

  3. jim0001

    March 1, 2011 at 12:03 am

    Diesel Fuel touches everything in our world! Why does diesel cost more than gasoline? I must be the dumbest person on the planet, because I can’t grasp the concept. As the light ends fracture off in the refining process, the first product produced is diesel fuel.Diesel fuel has more BTU’s than gasoline, gal. vs gal.
    Diesel fuel powers everything from planes, trains. ag equipment to transportation. In other words, the cost of diesel determines the cost of the loaf of bread you buy at the supermarket. If I can make a widget with three less manufacturing steps, then i can sell it for less. Then why does diesel cost more than gasoline? I own two diesel powered pick-up trucks and two diesel John Deere tractors. The efficiency for all four vehicles is greater than comparable gasoline fired vehicles, yet it costs me more to fuel them. Is it so the government can reap (RAPE) higher taxes?

    • Carl Nemo

      March 1, 2011 at 12:19 am

      Hi jim0001…

      Fourth post down on this thread, second paragraph I concur with your sentiments towards the crippling price for diesel along with the tax bite.

      Truckers, the bulk of the fleet being independent operators, farmers, or anyone using diesel within their commercial, day to day operations should have an exemption card for at least 50% less than the current tax on the fuel. Of course crimpols are short-sighted to greedy and have their focus on ‘programs’ concerning whatever and to hell with the hand that feeds them; ie., reasonably regulated, business friendly, commerce…!

      Carl Nemo **==

  4. bogofree

    March 1, 2011 at 3:06 pm

    Farmers and truckers depreciate their equipment, deduct maintenance costs and write fuel costs off as a business expense on the equipment they own. If the truck is leased they are allowed a deduction of 50 cents per mile. Parking, tolls and others fees may be deducted if leased or owned along with quite a laundry list of potential deductions.

    • Carl Nemo

      March 1, 2011 at 3:49 pm

      Thanks bogofree. I’d forgotten about tax related writeoffs.

      Carl Nemo **==