$4!? Gas price outlook divides experts; take our poll

By Roger Fillion

Wednesday, March 5, 2008

The prospect of $4-a-gallon gasoline in the coming months is a real possibility.

The approach of the summer driving season and rising crude oil prices could be the trigger.

“At this point, it’s fairly likely,” said Bryant Gimlin, energy risk manager at Gray Oil Co., a wholesale oil distribution company in Fort Lupton. “It could happen by fairly early spring, like May or so.”

But other experts said it’s not a sure bet.

Gasoline supplies in the United States appear adequate, and motorists are starting to curb their gasoline use.

Jim Ritterbusch, president of Ritterbusch and Associates, an oil trading advisory firm in Galena, Ill., said, “I don’t think we’ll reach that far.”

On Tuesday, the price of regular gasoline in Colorado averaged $3.080 a gallon, up from $2.913 a month earlier and $2.444 a year earlier, according to AAA. Diesel prices, meanwhile, touched a new record both in Colorado and nationally.

Colorado motorists can take heart, however. The price of regular gasoline here is lower than in many other states – including California, where it was $3.499 on Tuesday. The national average was $3.168.

Tuesday, Colorado was tied for 11th among states with the lowest prices.

“The good news is that we are much better off than many other states,” said Eric Escudero, spokesman for AAA Colorado.

Still, he noted that gasoline prices for this time of year are unusually steep: “We’ve never seen it this high this early.”

The national record was set May 24 last year when regular prices averaged $3.227. The record also was set in Colorado then, at $3.344.

On an inflation-adjusted basis, gasoline prices nationally peaked in March 1981 at $3.405, according to U.S. Energy Information Administration data going back to 1980.

Experts pin the current specter of $4 gas on crude-oil prices having broken through the $100-a-barrel level.

On Monday, crude oil touched a new high of $103.95, topping the inflation-adjustedrecord set in April 1980. By Tuesday, however, futures prices had dropped below $100.

Crude prices have jumped in response to tensions erupting in global hot spots such as Venezuela, the Middle East and Nigeria.

A falling dollar also has put pressure on crude prices. Commodity traders have been betting on rising inflation and buying crude as a hedge.

On Tuesday, a top Energy Department official told a Senate hearing that market speculation may be adding as much as $12 to the price of crude oil and that prices may not yet have peaked.

“There is significant price risk to gasoline, because crude prices could advance on any geopolitical developments or supply disruptions,” said Ritterbusch.

That said, he doesn’t expect gasoline prices will hit $4 anytime soon.

“We have plenty of gasoline,” he said. “The refinery system seems more geared up to produce a larger amount of summer-grade product.”

He also pointed to increased gasoline imports to the United States and declining gasoline demand here.

The rising price of gasoline appears to be having an impact on motorists’ gasoline appetite.

Gasoline demand in the United States dropped 1.1 percent in the four weeks ending Feb. 22 compared with a year earlier, according to U.S. government data.

The recent decline is reported to be the most sustained fall in 16 years – except for the drop triggered by the supply disruptions following Hurricane Katrina in 2005.

There’s evidence that $4 gasoline could spur Americans to change their driving habits even more.

An estimated 65 percent of American car owners say they would change their driving behavior “dramatically” if gasoline hits $4, according to a study commissioned by the Automotive Aftermarket Industry Association.

“While a third of consumers claim they already changed their driving behavior by curtailing driving or maintaining their vehicle better when gas prices reached $3 a gallon, the real tipping point is $4 a gallon,” said Kathleen Schmatz, CEO of the trade group, which represents businesses that manufacture, distribute and sell motor vehicle parts, accessories, and services.

According to a survey conducted by Opinion Research Corp. for AAIA, 91 percent of drivers are driving less and 75 percent are maintaining their vehicle better because of rising gas prices.

Other behavioral changes include carpooling, buying more fuel-efficient vehicles and making greater use of public transportation.

Daphne Greenwood, economics professor at the University of Colorado at Colorado Springs, said $4 gasoline would produce “sticker shock” for Colorado consumers and cause changes in other spending habits.

“People cut back on things that are discretionary,” she said, ticking off items such as purchases of clothes and electronics and dining out.

fillionr@RockyMountainNews.com or 303-954-2467

Gas price merry-go-round

Commuters may see pricey gasoline by early spring, but it won’t be the first time pump prices have made Americans squirm, cry or curse. Here are some record years:

In 1981 . . . gas hit an all-time high of $3.405 per gallon, price adjusted for inflation. At the time, it was $1.41.

In 2000 . . . inflation considered, gas prices topped the $2 mark, hitting $2.023 in June that year. At the time it was $1.63.

In 2008 . . . the price of gas averaged $3.080 a gallon in Colorado on Tuesday. Experts say prices could top $4 this spring.

© Rocky Mountain News