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Gasoline prices going up, up, up
Cost is $2 a gallon nationwide but are expected to go higher
Tuesday, March 08, 2005

The price of unleaded gasoline shot up by 7 cents last week to an average $2 a gallon nationwide, the government reported yesterday, adding fuel to concerns that motorists are on a collision course with record-high prices at the pump.

 
 
 

Graphic: Paying more at the pump

 
 
 

When Barto Ferrara, a Citgo station owner in Monessen, got socked over the weekend with an 8-cent-a-gallon hike in wholesale gasoline prices, he said he had no choice but to pass the increase to customers, boosting the price of self-serve unleaded gasoline to $2.09.

Ferrara isn't smiling. When pump prices go up, customers react by driving less, he says. If prices continue to surge, he worries that his sales on any given day could be his last. With his business operating on razor-thin profit margins of just a few cents a gallon, he said, "we're just trying to survive."

As crude oil prices continue to rise, industry experts are warning dealers and motorists to brace for record high gasoline prices again this spring and summer.

The average pump price for self-serve gasoline hit $1.92 a gallon nationwide last week, 22 cents higher than a year ago and just 13 cents shy of the all-time record set last May, according to the American Automobile Association.

Locally, self-serve unleaded averaged $1.91 in Western Pennsylvania last week, up about 25 cents from the same time last year, AAA said.

Newer reports due this week are expected to mirror the increases reported by the Energy Information Administration yesterday.

The spike comes as drivers are facing a potent one-two punch at the pump this year.

Gasoline prices typically rise this time of year as refiners shut down production to switch from winter to more expensive summer blends. The changeover saps supply, raising prices.

On top of that, however, crude oil prices also are soaring. They already are about 45 percent higher than last year and are expected to continue to climb amid strong demand, tight supply and the declining dollar. The head of OPEC has projected that crude could gush to as high as $80 a barrel, up from about $54 currently.

Richard Moody, senior economist with PNC Financial Services Group, doesn't believe oil prices will go that high, but he would not be surprised to see them remain at their recent levels for a while.

The run-up is being driven by the growing U.S. and Chinese economies, OPEC member countries who are producing at close to capacity, and unusually harsh winter weather in recent weeks, he said. Since it takes some time for the full impact of crude oil prices to register at the gas pump, Moody agrees gas prices likely will rise further in coming weeks.

"All of the dynamics are in place for U.S. motorists to pay new record high prices again this year," said Geoff Sundstrom, spokesman at AAA headquarters in Heathrow, Fla.

Several forecasts say pump prices in the $2.10 to $2.20 range are possible, beating the record $2.05 set last May.

"It looks like it's going to be a very expensive summer driving season," said Bevi Norris, spokeswoman for AAA East Central in Pittsburgh, which tracks gasoline prices in Pennsylvania, West Virginia, Ohio and New York.

Higher prices cut deeply into motorists' pocketbooks. The typical car burns through about 700 gallons of gas annually, according to the National Association of Convenience Stores. At that rate, a customer paying an extra 30 cents per gallon over the course of a year would see his gas tab rise by $210.

Norris said motorists can ease the sting by shopping around for the lowest prices. Keep in mind, however, that driving too far out of the way for the best bargain will defeat the purpose, she said.

Among her other pump-pinching tips: read your owner's manual to be sure your using the correct grade of gasoline for your car; combine trips by combining errands; consider carpooling; consider gas mileage when shopping for a new vehicle; and avoid driving during rush hour, when possible.

PNC's Moody offers one other note of comfort. Adjusted for inflation, today's prices aren't even close to what motorists were paying in 1980-81. Prices then hit $2.50 a gallon in some cases, which adjusted for inflation would be about $5.25 in today's dollars.

First published on March 8, 2005 at 12:00 am
Elwin Green contributed to this report. Patricia Sabatini can be reached at psabatini@post-gazette.com or 412-263-3066.