Thursday, September 1, 2005
Katrina driving price of gas to $3 a gallonRetailers say refineries making huge profits
By DAN RICHMAN
SEATTLE POST-INTELLIGENCER REPORTER
Seattle-area gas prices, already at record highs, are climbing at unprecedented rates and will hit or exceed $3 per gallon going into the upcoming Labor Day weekend, experts said.
One gas executive predicted prices will reach $4.
For hotly disputed reasons, prices here likely will climb even though this region enjoys almost complete energy independence from the Gulf of Mexico refineries and crude-oil sources damaged earlier this week by Hurricane Katrina.
Some local drivers said the high prices are compelling them to give up their cars, whereas others said they aren't feeling enough pain yet.
"I thought my ceiling was $3 per gallon," said Angelo Davis, 28, as he filled his car with $2.99 per gallon gas at the Union 76 station at East Roy Street and Broadway East. "I guess I'll have to re-evaluate that."
Danielle Mailand, a cocktail waitress in Pioneer Square, said she had reached her limit. She's now walking from Capitol Hill to her job every day and taking a taxi home.
"Gas prices plus parking are double now what they used to be," she said.
Regular unleaded gas in the Seattle area sold for an average of $2.76 Wednesday, according to GasBuddy.com. The average price nationwide was $2.80 a gallon, an increase from $2.60 Tuesday.
"That's certainly the largest jump we've ever seen," said Jason Toews, GasBuddy's co-founder.
Marcus Kenney, 26, of Capitol Hill bought $10 of gas Wednesday afternoon -- double his usual amount.
"You've gotta get a little more before it goes up even more," he said.
Gas is still more expensive elsewhere. Prices in parts of Michigan and in Dayton, Ohio, rose 50 cents Tuesday night to $3.09, according to Brad Proctor, founder of Gaspricewatch.
The highest price in the country for regular-grade gasoline was $3.88 a gallon in Death Valley, Calif. The lowest was $2.36 in Louisville, Ky.
Seattle-area pump prices haven't risen nearly as sharply -- but our turn may be coming, said GasBuddy's Toews.
"Prices seem to be going up all across the country, and I'd guess we'll see the same thing in Seattle, probably within the next several days," he said.
The Bush administration agreed to release oil from its emergency stockpile to help Gulf Coast refiners hobbled by a loss of shipments because of Hurricane Katrina. That move could ease prices by easing the supply of gasoline.
The federal government also will allow the temporary sale of higher-polluting gasoline to avert shortages.
Where will the price spiral end?
"We're going to be over $4 a gallon retail by the end of next week," predicted William Shireman, executive vice president of Gas City Ltd., a 50-station chain based in Frankfort, Ill.
Toews disagreed, setting the likely peak at $3.50.
Wherever they stop, the rising prices are leading to more drive-off gas thefts, which service station owners are trying to thwart by requiring prepayment.
Drive-offs cost retailers about $237 million last year, up from $112 million in 2003, according to the National Association of Convenience Stores, which represents about 111,000 stores that sell gas.
Western Washington doesn't rely at all on crude oil from the Gulf of Mexico, and it refines enough gasoline to export it to neighboring states and foreign countries. So why would prices rise here after the Katrina disaster?
Officials said the price increases here result from complex factors involving supply, demand and national markets.
Janet Ray, a spokeswoman for AAA Washington Inland, said the pricing pinch won't come from shortages at Western Washington's refineries.
Rather, shortages here may result when our refineries begin shipping to the South, the Midwest and the mid-Atlantic, which are dependent on oil and gasoline from the Gulf of Mexico.
It's "very probable" those sales will take place, she said, though she didn't know when.
The Western States Petroleum Association was less specific in addressing why gasoline prices here are rising.
"The question often arises why we have this market volatility if we have production here," spokeswoman Amanda Mangels said in an earlier interview.
"It's part of a very complicated system of refining, production and distribution."
It's not that complicated to Tim Hamilton, executive director of the Automotive United Trades Organization in Olympia, which represents about 400 gas retailers in Washington state.
"The price increases are just refiners making more profits," he said. "The increases in pump price have crippled the retailers while providing huge profits to the refineries."
He said gas retailers nationwide average a profit of between 10 and 11 cents per gallon, which is cut into by processing charges of between 2.8 percent and 3 percent imposed by credit-card companies.
He also said exports from Western Washington refineries to Australia, Chile and other countries are cutting into supplies available locally, raising prices here.
Katrina is affecting travel by air as well as by car. Delta, American, Northwest and Continental airlines have cut or canceled flights into and out of New Orleans, Gulfport, Miss., or both.
Daily jet-fuel production nationwide has been cut 13 percent because of damage to the refineries, said Jack Evans of the Air Transport Association.
The flight cancellations and fuel problems come at a time when the major airlines, especially Delta, are already reeling.
"I think all of the airlines will feel this (and) ... $70 a barrel oil is the straw that would break the camel's back," airline expert Terry Trippler said.
Crude oil for October delivery sold for $68.80 a barrel, down 14 cents, in after-hours trading Wednesday. The prices were 56 percent higher than a year ago.
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