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Gas Hits $4 in KC Area | Oil Watchdog

Gas Hits $4 in KC Area

Fri, May 23, 2008 at 12:56 pm

    Gas Hits $4 in KC Area

    It’s Here: Gas Hits $4 In KC Area

    Four dollars and rising.

    Soaring oil prices have pushed the
    average price of premium gasoline in the Kansas City area past $4 a
    gallon for the first time. Other fuel grades, including regular, appear
    poised to follow.

    Premium fuel stood at $4 or slightly more
    Thursday on both the Missouri and Kansas sides of the metropolitan
    area, according to AAA. The price for regular gas averaged $3.69 on the
    Missouri side and $3.74 on the Kansas side.

    But many gas stations
    were charging a few cents higher than the average, and some were
    selling regular fuel for $3.90. Diesel prices were even higher, with
    the average as much as $4.54 a gallon.

    Asked when, or if, prices will head lower, industry observers appeared to be at a loss.

    seems to be no end to it. But obviously there will be,” said Neil
    Gamson, an analyst for the Energy Information Administration.

    Crude oil and fuel prices have been on a record run in recent weeks for a variety of reasons.

    demand, particularly in rapidly expanding economies such as China and
    India, continues to grow faster than supplies. There are ongoing fears
    of supply disruptions in politically unstable countries such as Iraq,
    Nigeria and Venezuela. Speculators hunting fast money are betting on
    higher prices. And a weakening dollar, which is used to value oil
    worldwide, also is pushing prices higher.

    Much-touted ethanol
    blends aren’t offering much relief. The rising price of corn also has
    pushed ethanol costs higher. And when the lower energy content of
    ethanol is considered, it’s an even worse deal financially than

    AAA said the nationwide average energy-adjusted price
    of E-85, a blend of 85 percent ethanol and 15 percent gasoline, is
    $4.15 a gallon — higher than its pump price.

    Rising fuel prices are beginning to affect gasoline consumption.

    the early 1980s, when oil prices reached about $100 in today’s dollars,
    demand declined 8 percent. Although such a dramatic decline has not
    happened this time, gas demand this year is down 0.6 percent and is on
    track for the first decline since 1991.

    David Daniels of Overland
    Park said the higher prices have already caused him to make some
    adjustments, such as avoiding driving vacations.

    “I’m retired and don’t drive much anyway,” he said. “But I do now try to combine as many trips as possible.”

    bright spot, said the General Motors retiree, is that higher fuel
    prices should create a market for electric and fuel-cell vehicles.

    Edwards has a 90-mile round-trip commute and is reducing his speed on
    the route by 5 mph. He’s also shopping on the way home instead of
    returning to the store later. And he’s more often using the phone and
    the Internet to visit with friends and relatives rather than making

    High gas prices also changed his plans for the Memorial
    Day holiday. “Not going to the big lake (of the Ozarks) this holiday,”
    he said.

    As painful as these prices may be for household budgets,
    they are not as high as they would be if refiners were booking their
    typical profit margins.

    Last spring, when tight supplies pushed
    gas prices higher, refining profits also soared. Gas prices later
    declined after it became clear that supplies were ample enough to meet

    This year it’s different. Refining profits for diesel are
    up this year, in part, because of worldwide demand for the fuel. But
    refining margins on gasoline are up only slightly, because of lower

    Put simply, soaring oil prices have been the main driver behind the climb in gas prices.

    it’s possible that refinery margins could still increase on gasoline,
    it’s the cost of crude oil that will continue to have the biggest
    effect on gas prices.

    This month saw a surge in the price of West
    Texas Intermediate, the U.S. benchmark, which increased $20 to $132.57
    a barrel. On Thursday, about $2 of that was taken back, with a barrel
    closing at $130.21. Wholesale gas prices also declined slightly.

    some within the oil industry contend a correction is overdue, others
    say growing worldwide demand for oil will keep prices up. One
    prediction by a respected Goldman Sachs analyst already has oil
    eventually going to $200 a barrel.

    So, is there any good news for consumers? Perhaps.

    least part of the recent increase is thought to have been fueled by
    financial speculators. And some increasingly flustered market-watchers
    remain convinced that the fundamentals of supply and demand simply
    don’t justify $130 oil.

    “Professional petroleum suppliers are
    saying, ‘What the hell is going on?’ ” said Lewis Adam, president of
    Admo Energy in Kansas City, which helps businesses, including gas
    retailers, manage fuel costs.

    Adam said there probably is enough
    momentum in oil prices to at least briefly push gas prices past $4 in
    the Kansas City area. But he has hopes for relief soon after Memorial
    Day. He thinks oil prices could decline to about $100 — so instead of
    instead of facing $4 gas, it’s possible we would have closer to
    $3-a-gallon fuel.

    “It could be huge when it happens,” Adam said.

    Consumer groups, trucking association want a ‘hot fuel’ fix

    It’s warming up, and “hot fuel” is back in the news.

    consumer groups and an organization that represents independent truck
    drivers said Thursday at a news conference in Washington that with gas
    prices at a record high, it’s high time to fix a problem that gives
    consumers less energy per gallon because of temperature fluctuations
    that change fuel volume.

    Consumers “would be even more angry if
    they realized they were paying ($3 billion annually) for gas they don’t
    get,” said Joan Claybrook, president of Public Citizen.

    At recent
    prices, hot fuel can cost consumers as much as 10 cents a gallon,
    according to estimates generated by the groups. Truckers stand to lose
    about $1,200 a year.

    Sen. Claire McCaskill of Missouri is pushing
    legislation that would require gas retailers to make adjustments in the
    volume of a gallon of fuel to account for temperature fluctuations.

    Public Citizen were Consumer Watchdog, based in Santa Monica, Calif.,
    and the Owner-Operator Independent Drivers Association, based in Grain
    Valley, Mo.

    To reach Steve Everly, call 816-234-4455 or send e-mail to severly@kcstar.com.

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