WSJ - Drivers Get a Break on Gas Prices

[Klaus]

AUTOS

Drivers Get a Break on Gas Prices

Cost at Pump Has Fallen Even as Oil Reaches
For $50 a Barrel, but Respite Isn't Likely to Last
By THADDEUS HERRICK

Staff Reporter of THE WALL STREET JOURNAL
August 18, 2004; Page D1

Oil prices have been surging, but so far drivers are being spared the brunt of it.

At the pumps, gas averaged $2.07 a gallon as recently as May 24, according to the Department of Energy's Energy Information Agency. At the time, oil was trading for around $42 a barrel.

Now, with crude-oil prices threatening to reach $50, gas prices have stabilized or even come down in many states. The average price per gallon for regular unleaded fuel is now $1.88, though prices vary widely around the country.

Californians pay an average of $2.09 a gallon for regular fuel, according to an American Automobile Association survey. That would be a bargain for Hawaiians, who pay $2.35 for that same gallon. Meanwhile, residents of Oklahoma and Georgia shell out an average of only $1.75 for a gallon of regular.

Unfortunately for Hummer enthusiasts and resolute non-car-poolers, this situation isn't likely to last. What has been keeping prices low is that the summer crunch for gas wasn't as severe as expected because Americans appear to have driven less. After growing by an astounding 3% for the first four months of the year, demand has declined to normal levels. That also helped keep gasoline inventories healthy.

The trouble is that even with this cushion, growing world consumption of oil and tight supplies are likely to keep the price of gasoline high for the months to come. Analysts say higher costs will be passed along to consumers in the coming weeks and see the average price of gas surging above $2 again.

"These issues are not going to go away," says Dave Costello, an economist with Energy Information Administration, which forecasts that crude oil will sell for close to $40 a barrel through 2005. Oil prices make up about half the cost of every gallon of gas, so high costs eventually get passed along to consumers. Indeed, prices for gasoline on the Gulf Coast spot market shot up 16% last Friday from a week earlier, a sign that retail prices won't be long behind. Heating oil may offer a reprieve: So far analysts say demand for it should be lower than last year.

The variations in gas prices around the country result from differences in regulations and in market forces. California, for instance, is one of the nation's tightest gasoline markets, lacking the same access to Gulf Coast refineries that help keep prices steadier in other parts of the nation. Nor do those refiners produce California's required low emission blend of fuel.

Similarly, when New York and Connecticut switched this year from an additive known as MTBE to ethanol-blended gasoline, the two states left themselves vulnerable to refinery outages, because nearby states that don't make the ethanol blend are powerless to help out. And the Midwest continues to struggle every year with the potential for price spikes because in times of tight supply they have to rely on emergency imports from the Gulf Coast or even Canada or Europe.

For consumers, the likelihood of higher gas prices means fuel economy will continue to grow in importance. If you drive 15,000 miles a year, you'll pay $1,800 annually to fuel up a four-wheel-drive Ford Explorer sport-utility vehicle with an eight-cylinder engine that averages 16 miles to the gallon. That's according to a U.S. government estimate based on $1.92-a-gallon gas.

By driving a four-cylinder Toyota Camry -- by no measure a small car -- averaging 26 miles per gallon, you can slash that fuel bill to about $1,100. And if you go a step further and buy a Toyota Prius, which runs on a gas-and-electric hybrid engine and gets 55 miles to the gallon, you'll pay just $524 a year at the pump.

Such an investment could pay off for years to come. In the short term, analysts say a gasoline price spike may be small and short lived. But there will be longer-term pressure keeping prices high.

The reason: In an oil-thirsty world, refiners are finding it increasingly difficult to get the oil they need to make gas and other petroleum products. Presently, the little crude oil that is available is coming from the Persian Gulf, which has higher sulfur content than many U.S. refineries can process.

The more troubling problem is that there aren't enough refiners. The number of U.S. plants has declined by about 50% since 1980, as refiners closed or sold off their plants because of weak profit margins. Meanwhile, there hasn't been a new refinery built in the U.S. for close to 30 years due to growing regulation and community opposition.

U.S. refiners have made up the gap by boosting output at existing plants and importing more gas, increasingly from Europe. But gas imports, which now account for about 10% of U.S. supply, have been spotty. Imports dropped significantly earlier this year when federal rules mandating gasoline with lower sulfur content took effect, though they have rebounded in recent weeks.

Even while gasoline demand has dropped in the U.S., demand for crude oil continues to soar. The Paris-based International Energy Agency says world demand grew 1.7 million barrels a day in 2003 and expects it to grow another 2.5 million barrels a day this year.

Add to that scenario potential disruptions from key suppliers such as Venezuela and Russia, and crude oil could easily hit $50 a barrel within days, a price refiners would likely pass on to drivers.

FILLING UP THE TANK

The average price of a gallon of regular-grade gasoline is highest in:
Hawaii $2.35
Alaska $2.09
California $2.09
New York $2.04

The same gallon of regular gas is least expensive in:
Oklahoma $1.75
Georgia $1.75
Texas $1.77
Missouri $1.78

Source: AAA

[Klaus]

AUTOS

Drivers Get a Break on Gas Prices

Cost at Pump Has Fallen Even as Oil Reaches
For $50 a Barrel, but Respite Isn't Likely to Last
By THADDEUS HERRICK

Staff Reporter of THE WALL STREET JOURNAL
August 18, 2004; Page D1

Oil prices have been surging, but so far drivers are being spared the brunt of it.

At the pumps, gas averaged $2.07 a gallon as recently as May 24, according to the Department of Energy's Energy Information Agency. At the time, oil was trading for around $42 a barrel.

Now, with crude-oil prices threatening to reach $50, gas prices have stabilized or even come down in many states. The average price per gallon for regular unleaded fuel is now $1.88, though prices vary widely around the country.

Californians pay an average of $2.09 a gallon for regular fuel, according to an American Automobile Association survey. That would be a bargain for Hawaiians, who pay $2.35 for that same gallon. Meanwhile, residents of Oklahoma and Georgia shell out an average of only $1.75 for a gallon of regular.

Unfortunately for Hummer enthusiasts and resolute non-car-poolers, this situation isn't likely to last. What has been keeping prices low is that the summer crunch for gas wasn't as severe as expected because Americans appear to have driven less. After growing by an astounding 3% for the first four months of the year, demand has declined to normal levels. That also helped keep gasoline inventories healthy.

The trouble is that even with this cushion, growing world consumption of oil and tight supplies are likely to keep the price of gasoline high for the months to come. Analysts say higher costs will be passed along to consumers in the coming weeks and see the average price of gas surging above $2 again.

"These issues are not going to go away," says Dave Costello, an economist with Energy Information Administration, which forecasts that crude oil will sell for close to $40 a barrel through 2005. Oil prices make up about half the cost of every gallon of gas, so high costs eventually get passed along to consumers. Indeed, prices for gasoline on the Gulf Coast spot market shot up 16% last Friday from a week earlier, a sign that retail prices won't be long behind. Heating oil may offer a reprieve: So far analysts say demand for it should be lower than last year.

The variations in gas prices around the country result from differences in regulations and in market forces. California, for instance, is one of the nation's tightest gasoline markets, lacking the same access to Gulf Coast refineries that help keep prices steadier in other parts of the nation. Nor do those refiners produce California's required low emission blend of fuel.

Similarly, when New York and Connecticut switched this year from an additive known as MTBE to ethanol-blended gasoline, the two states left themselves vulnerable to refinery outages, because nearby states that don't make the ethanol blend are powerless to help out. And the Midwest continues to struggle every year with the potential for price spikes because in times of tight supply they have to rely on emergency imports from the Gulf Coast or even Canada or Europe.

For consumers, the likelihood of higher gas prices means fuel economy will continue to grow in importance. If you drive 15,000 miles a year, you'll pay $1,800 annually to fuel up a four-wheel-drive Ford Explorer sport-utility vehicle with an eight-cylinder engine that averages 16 miles to the gallon. That's according to a U.S. government estimate based on $1.92-a-gallon gas.

By driving a four-cylinder Toyota Camry -- by no measure a small car -- averaging 26 miles per gallon, you can slash that fuel bill to about $1,100. And if you go a step further and buy a Toyota Prius, which runs on a gas-and-electric hybrid engine and gets 55 miles to the gallon, you'll pay just $524 a year at the pump.

Such an investment could pay off for years to come. In the short term, analysts say a gasoline price spike may be small and short lived. But there will be longer-term pressure keeping prices high.

The reason: In an oil-thirsty world, refiners are finding it increasingly difficult to get the oil they need to make gas and other petroleum products. Presently, the little crude oil that is available is coming from the Persian Gulf, which has higher sulfur content than many U.S. refineries can process.

The more troubling problem is that there aren't enough refiners. The number of U.S. plants has declined by about 50% since 1980, as refiners closed or sold off their plants because of weak profit margins. Meanwhile, there hasn't been a new refinery built in the U.S. for close to 30 years due to growing regulation and community opposition.

U.S. refiners have made up the gap by boosting output at existing plants and importing more gas, increasingly from Europe. But gas imports, which now account for about 10% of U.S. supply, have been spotty. Imports dropped significantly earlier this year when federal rules mandating gasoline with lower sulfur content took effect, though they have rebounded in recent weeks.

Even while gasoline demand has dropped in the U.S., demand for crude oil continues to soar. The Paris-based International Energy Agency says world demand grew 1.7 million barrels a day in 2003 and expects it to grow another 2.5 million barrels a day this year.

Add to that scenario potential disruptions from key suppliers such as Venezuela and Russia, and crude oil could easily hit $50 a barrel within days, a price refiners would likely pass on to drivers.

FILLING UP THE TANK

The average price of a gallon of regular-grade gasoline is highest in:
Hawaii $2.35
Alaska $2.09
California $2.09
New York $2.04

The same gallon of regular gas is least expensive in:
Oklahoma $1.75
Georgia $1.75
Texas $1.77
Missouri $1.78

Source: AAA

[Klaus]

AUTOS

Drivers Get a Break on Gas Prices

Cost at Pump Has Fallen Even as Oil Reaches
For $50 a Barrel, but Respite Isn't Likely to Last
By THADDEUS HERRICK

Staff Reporter of THE WALL STREET JOURNAL
August 18, 2004; Page D1

Oil prices have been surging, but so far drivers are being spared the brunt of it.

At the pumps, gas averaged $2.07 a gallon as recently as May 24, according to the Department of Energy's Energy Information Agency. At the time, oil was trading for around $42 a barrel.

Now, with crude-oil prices threatening to reach $50, gas prices have stabilized or even come down in many states. The average price per gallon for regular unleaded fuel is now $1.88, though prices vary widely around the country.

Californians pay an average of $2.09 a gallon for regular fuel, according to an American Automobile Association survey. That would be a bargain for Hawaiians, who pay $2.35 for that same gallon. Meanwhile, residents of Oklahoma and Georgia shell out an average of only $1.75 for a gallon of regular.

Unfortunately for Hummer enthusiasts and resolute non-car-poolers, this situation isn't likely to last. What has been keeping prices low is that the summer crunch for gas wasn't as severe as expected because Americans appear to have driven less. After growing by an astounding 3% for the first four months of the year, demand has declined to normal levels. That also helped keep gasoline inventories healthy.

The trouble is that even with this cushion, growing world consumption of oil and tight supplies are likely to keep the price of gasoline high for the months to come. Analysts say higher costs will be passed along to consumers in the coming weeks and see the average price of gas surging above $2 again.

"These issues are not going to go away," says Dave Costello, an economist with Energy Information Administration, which forecasts that crude oil will sell for close to $40 a barrel through 2005. Oil prices make up about half the cost of every gallon of gas, so high costs eventually get passed along to consumers. Indeed, prices for gasoline on the Gulf Coast spot market shot up 16% last Friday from a week earlier, a sign that retail prices won't be long behind. Heating oil may offer a reprieve: So far analysts say demand for it should be lower than last year.

The variations in gas prices around the country result from differences in regulations and in market forces. California, for instance, is one of the nation's tightest gasoline markets, lacking the same access to Gulf Coast refineries that help keep prices steadier in other parts of the nation. Nor do those refiners produce California's required low emission blend of fuel.

Similarly, when New York and Connecticut switched this year from an additive known as MTBE to ethanol-blended gasoline, the two states left themselves vulnerable to refinery outages, because nearby states that don't make the ethanol blend are powerless to help out. And the Midwest continues to struggle every year with the potential for price spikes because in times of tight supply they have to rely on emergency imports from the Gulf Coast or even Canada or Europe.

For consumers, the likelihood of higher gas prices means fuel economy will continue to grow in importance. If you drive 15,000 miles a year, you'll pay $1,800 annually to fuel up a four-wheel-drive Ford Explorer sport-utility vehicle with an eight-cylinder engine that averages 16 miles to the gallon. That's according to a U.S. government estimate based on $1.92-a-gallon gas.

By driving a four-cylinder Toyota Camry -- by no measure a small car -- averaging 26 miles per gallon, you can slash that fuel bill to about $1,100. And if you go a step further and buy a Toyota Prius, which runs on a gas-and-electric hybrid engine and gets 55 miles to the gallon, you'll pay just $524 a year at the pump.

Such an investment could pay off for years to come. In the short term, analysts say a gasoline price spike may be small and short lived. But there will be longer-term pressure keeping prices high.

The reason: In an oil-thirsty world, refiners are finding it increasingly difficult to get the oil they need to make gas and other petroleum products. Presently, the little crude oil that is available is coming from the Persian Gulf, which has higher sulfur content than many U.S. refineries can process.

The more troubling problem is that there aren't enough refiners. The number of U.S. plants has declined by about 50% since 1980, as refiners closed or sold off their plants because of weak profit margins. Meanwhile, there hasn't been a new refinery built in the U.S. for close to 30 years due to growing regulation and community opposition.

U.S. refiners have made up the gap by boosting output at existing plants and importing more gas, increasingly from Europe. But gas imports, which now account for about 10% of U.S. supply, have been spotty. Imports dropped significantly earlier this year when federal rules mandating gasoline with lower sulfur content took effect, though they have rebounded in recent weeks.

Even while gasoline demand has dropped in the U.S., demand for crude oil continues to soar. The Paris-based International Energy Agency says world demand grew 1.7 million barrels a day in 2003 and expects it to grow another 2.5 million barrels a day this year.

Add to that scenario potential disruptions from key suppliers such as Venezuela and Russia, and crude oil could easily hit $50 a barrel within days, a price refiners would likely pass on to drivers.

FILLING UP THE TANK

The average price of a gallon of regular-grade gasoline is highest in:
Hawaii $2.35
Alaska $2.09
California $2.09
New York $2.04

The same gallon of regular gas is least expensive in:
Oklahoma $1.75
Georgia $1.75
Texas $1.77
Missouri $1.78

Source: AAA