Record high gas prices
expected to keep rising
BY MARC CAVELLA and VINCE ECHAVARIA
Staff Writers
Travelers at the Jersey Shore will face record gas prices as they drive to their destinations this summer.
The average price of a gallon of regular unleaded gasoline has risen dramatically in Monmouth and Ocean counties over the past year, from $1.44 per gallon in May 2003 to the current price of about $2 per gallon.
Gas prices are set by futures traders who look at supply and demand figures from the U.S. Department of Energy, said Fred Rozell, director of Retail Pricing for Oil Price Information Service, a Lakewood-based petroleum information service.
"Prices drop when supply outweighs demand, and vice-versa," Rozell said, "and there has been a 3-percent increase in demand recently, which is a huge number."
Refineries "have been running at around 97 percent over the past few weeks," Rozell said. "Even when refineries running at 100 percent, they can produce, at most, about 8.8 million barrels of gas a day."
The latest figures from the Department of Energy put nationwide demand at about 9.5 million barrels a day.
"We’re seeing a lot of reasons for the current prices," said Pam Maiolo, a public information director for AAA in Hamilton. "Supply and demand issues, the summer is coming so people are out more and holidays, like Memorial Day, are traditional times that people travel more."
Maiolo said there is no cap on what station owners can charge, which helps, but does not explain why gas prices rise during the summer season.
"The retailer is not making much more money as wholesale gasoline prices increase," said Rozell. Oil pipeline and terminal fees contribute to the price markup, and then stations do the same, "but they need to look at competition’s prices," Rozell added, "and they’re not making any real money off these price increases."
Oil companies, however, are.
"Oil companies are making very good refining margins [profits]," Rozell said.
Supplies of crude oil are fairly healthy, he added, and because refiners are making so much money producing and selling gas, they are producing it as fast as they can in order to maximize profits as much as possible.
Exxon-Mobil posted record first-quarter U.S. earnings of $5.4 billion, up $650 million from the first quarter of 2003, according to its Web site. Sunoco has posted first-quarter U.S. earnings of $89 million, an increase of $3 million from the 2003 first quarter.
Another factor that contributes to summer price hikes is the type of gasoline the U.S. government requires cars to use during the season for environmental reasons. This "summer gas" — a lower-sulfur mixture that is less volatile when exposed to higher temperatures — is more expensive for foreign refineries to manufacture, Rozell said. Suppliers in the United States realize there will be less foreign oil to compete with and raise their prices accordingly.
Location also factors into prices, Maiolo said. New Jersey’s southern counties have lower prices than the northern counties.
Maiolo said residents should not expect to see a decrease in prices any time soon.
"Hopefully prices will stabilize, but again we’re coming into high travel season," she said. "Demand will probably exceed what production there is. Gas prices in this state are increasing at a record pace."
"The highest prices are yet to come," Rozell said, adding that demand could possibly increase to 10 million barrels a day by the end of the summer.
Consumers should see a drop in prices after Labor Day, when foreign oil imports will increase, Rozell said.
"These markets tend to correct themselves," he said. "After the summer is over, prices will go down."
Until then, Maiolo advised motorists of ways they can save themselves some money in the summer season.
"They need to make sure the car is tuned up properly," she said. "Check the tire pressure to make sure it’s adequate, and maintain a constant speed. Obviously, the lower the speed, the more gas you’re going to save."
Maiolo also said that people can save money by shopping around and comparing prices in their area.