Rising gasoline prices not cause for alarm yet

Published 12:00 am Wednesday, September 17, 2003

Rising gasoline prices have motorists scrambling for the best deals. Still, seasoned consumers have driven down this road before and know fluctuations are simply that &045; changes in the world oil market, some of which have come about because of jitters over a potential war with Iraq.

Pump prices in the Natchez area have risen about 20 percent over last year, with the average cost per gallon at $1.63, two cents below the national average now.

&uot;This is not long term,&uot; said Lawrie Cloutier, wholesale distributor for several major gasoline brands and owner of a number of stations in the area. &uot;The price is going to come down.&uot;

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The forces driving gasoline pricing are complex, much more since crude oil in 1983 and gasoline in 1987 became commodities bought and sold on the New York Mercantile Exchange.

&uot;Years back, you knew when to expect prices to go up and you had time to react,&uot; Cloutier said. &uot;Now the price can go up in one day.&uot;

When speculators in the commodities market believe prices have peaked, they begin to sell. Their actions have direct impact on pump prices.

Companies such as Cloutier Oil must operate under the pressures of replacement costs.

When a company buys gasoline for $1 a gallon but has to replace it with gasoline that costs $2, some margin has to be taken into consideration in order for the business to remain in the black.

Demand for gasoline has been rising in the United States by 3 to 4 percent annually.

However, Cloutier does not believe the recent focus on sports utility vehicles has merit. &uot;That gas-guzzling theory from the 1970s just does not play today,&uot; he said.

Studies show that Americans drive almost twice as much as they did 20 years ago. Unlike their European counterparts, U.S. drivers have not had the impetus to conserve based on high costs of their gasoline.

In England, for example, motorists pay more than $5 a gallon, as drivers in Germany also do. The possibility of prices rising to those levels in the United States is not out of the question.

A lowering of inventories in the crude-oil markets could be one trigger to boost gasoline prices even higher worldwide.

Plenty of crude oil exists, Cloutier said. However, in the United States, mergers of the eight major oil companies into three companies has diminished refinery capacity.

The U.S. Department of Energy breaks down the costs at the gasoline pump into five categories:

Cost of the crude oil, which this week hovered in the $35 a barrel range, is about 37 percent of gasoline prices.

Cost of refining the oil into gasoline, which determines about 20 percent of the cost of gas at the pump.

Distributing and marketing make up less than 10 percent of the cost.

Federal and local taxes make up about 27 percent of the pump price.

Profit for the gas stations make up the remaining percentages. Stations generally add only a few cents per gallon to make necessary profit.