If it costs your family an extra $10-$20 every week or so to fill up your cars, you're probably not going to eat out as much, or buy as many new spring outfits, or take as many trips as you had intended this summer. That's the ripple effect that higher energy prices can have on the family budget and our entire economy. And one of the most frustrating things to hear is analysts admit there is no shortage of gasoline supply in the United States. Okay, so why the heck is my corner gas station consistently jacking up the price for a gallon of fuel?
We'll try to answer that question, plus help you find the cheapest places to fill up and other ways to save money on gas on tonight's show. Our expert panel includes Rolf Hanson, executive director of Petroleum Industries of Pennsylvania, a division of the American Petroleum Institute. API represents nvestor-owned, integrated energy companies like ConecoPhillips, Shell, Exxon Mobil, Chevron and Hess Gas prices have jumped 20 cents in the last month and they are up nearly one dollar from this time last year. A bit of solace -- the situation was worse in the summer of 2008 as the country slid into the Great Recession. Gas prices then were well above $4 a gallon. Most analysts predict a high of $4 this summer but some say it could shoot up to $5. Unrest in North Africa and the Middle East cause jitters in the energy industry and there's ongoing global demand for crude oil that puts pressure on supplies. Even though our economy has picked up in recent months, the spike in gas prices causes consumers to buy and use less gas. I guess you could consider that a silver lining!
The number one driver of the prices at the pump is the price of crude oil, Hanson says. Yesterday, crude ended the day at about $107 a barrel. "We need to take a step back and look at where prices were in 2008 when we had prices at $145 a barrel and $4 a gallon gasoline. The only thing that brought those prices down was the global recession," notes Hanson. "And now, we're starting to see an uptick in the globe as far as economic development and these economies starting to ramp up again. And these countries run on oil. And as these economies ramp up, their thirst for oil increases. And thus, because we have not had a national energy policy in this country, nothing fundamentally has changed since where we were in 2008."
Ross DiBono, president of the Pennsylvania Gas Retailers' Association, represents independent service station owners in Philadelphia and southeastern Pennsylvania. He pins a lot of the blame on oil speculators. "It used to be that the price of gas was based on supply and demand," DiBono says. "But what has happened over last 10 years, Wall Street really took over this industry. The hedge fund managers take a look at any social, political excuse or anything they can use to twist it around to say this affects the price of gasoline. Then you've got the refiners. Okay, they say, 'You're telling me all these reasons gas is going up. We'll go with you and raise the prices.' So, they're all in this together. They're greedy and that's where we are today. If it was strictly supply and demand, the price would be a lot lower today because there is no shortage of gas."
And, DiBono further asserts, "If there was a shortage of gas, OPEC said they'd turn the faucet up and put more gas out there." When I asked him about the potential greediness of independent service station owners, folks like him, he countered, "Actually what happens in an up market, the service station people make less money. Most of the business today is done on credit cards. These smaller service station owners have to pay a fee for credit card purchases. They're paying 7, 8, 9 cents a gallon just on fees. The big guys like Wawa and Sheetz are trying to keep prices down, so our guys are probably making less a gallon than they normally do just to compete. Remember, it costs $32,000 for a tanker of gas. When that gasoline is dropped, three days later the oil companies do a direct withdrawal from the (station's) account. If a station has a high volume, they get the dollars in. But if a guy doesn't do high volume, he's got all that high-priced gasoline in inventory, so cash flow becomes very, very difficult." Ross can't make the show in person but he's going to call in during the program and I'm sure he'd love to hear from you.
As you might expect, Rolf Hanson advocates for more domestic oil production. He points to President Obama's recent trip to Brazil and says the current national approach to energy drives production overseas and makes us more reliant on foreign sources of oil. "We're already importing 60 percent of the oil into this country. The way the policies are going you could expect that number to increase even further. While it's cliche to say we want to become less dependent on foreign oil, the policies of the federal government are actually making us more dependent on foreign oil," he claims.
What are some other avenues to explore in the quest for lower prices? The Obama administration might consider tapping into U.S. oil reserves. Some Democratic members of Congress are pushing for it and last month, White House chief of staff William Daly said the president might okay tapping into the U.S. Strategic Petroleum Reserve if concern mounts that crude prices above $104 a barrel could damage the U.S. economic recovery. The 727 million-barrel reserve is stored along the coast of the Gulf of Mexico. It is designed to serve as America's emergency defense supply if there are major disruptions in commercial supplies. Benchmark crude prices for May delivery rose to $106.90 per barrel on Tuesday. Already, many industries and non-profit groups that rely on transportation like food banks feel the effects of higher energy prices.
