If you take a cup of uncertainty, add a measure of mild panic, fold in a spoonful of speculation, combine with a refinery fire and cook under the hot media lights, what do you get?
If the last few days of gasoline price escalation here and across the country are an accurate indicator, the result is a rocket ride for gas prices at the pump.
Filling a 15-gallon tank Wednesday in Tacoma on average cost 75 cents more than it did Tuesday and $2.55 more than it did just a month ago as retailers react to wholesale prices that are rising as many as three times daily.
TacomaGasPrices.com reported Wednesday afternoon that Tacoma retail gas prices averaged $3.771 a gallon. At a few stations in the Tacoma area, regular unleaded gas was hovering at $3.99 a gallon.
Across the country, certain hotspots posted even higher prices. In Lake Buena Vista, Fla., near Orlando, one station was reported to be selling gas for up to $5.899 a gallon.
Wholesale prices were rising faster than retail, with some dealers seeing the cost of their supply increase overnight by as much as 20 cents a gallon, said industry experts. At retail gas stations that received new supplies Wednesday, that forced commensurate retail price increases.
The mild panic about increasingly pricey gas created queues at gasoline dealers such as Costco, Arco and Safeway, where gas was still selling for as little as $3.52 a gallon.
Oil industry observers say the price run-up is not based strictly on supply and demand.
“I think the media is the worst offender,” said Luke Xitco, president of Tacoma’s Associated Petroleum Products. Associated supplies dozens of retail gas stations in Western Washington with fuel.
“There are no supply issues, and consumption is down,” said Xitco.
Tim Hamilton, director of Automotive Trades United Organization, a dealers’ group, said he expects to see gas go over the $4-a-gallon mark soon.
Besides the concern about Middle East unrest, speculative buying by oil traders and media attention to gas price increases, Hamilton said a Friday fire at BP’s Ferndale refinery is driving prices upward.
“Shutdowns can push prices up,” said AAA spokeswoman Jennifer Cook in Bellevue. “That was already going on. This fire is going to add to it,” she told The Associated Press.
There’s no estimate when operations will resume at Cherry Point, and the investigation into the cause of Friday’s fire continues, said BP spokesman Scott Dean in Chicago.
He cautioned against directly relating gas prices to the operations of a single refinery.
“You really can’t pin a gas price on any single factor,” he said Wednesday. “You have to look at all the factors in totality. There are a lot of thing going on globally affecting crude oil prices, and that translates into prices at the pump.”
The rapid price increases are as painful or more painful to gasoline dealers and distributors than they are to the buying public, said Xitco.
Higher prices put strains on retailers’ credit lines because each load of gas is more costly than the last. And margins decrease as business and occupation taxes and credit card fees, which are based on a fixed percentage of total sales, mushroom while their retail margins remain the same.
In an environment in which wholesale prices are rapidly rising, Xitco said, sales begin to fall because of price pressures, and the dealers’ profits shrink.
Most dealers, he said, make more money selling potato chips and sodas in their convenience stores than they do selling fuel.
John Gillie: 253-597-8663 john.gillie@thenewstribune.com
JOIN THE DISCUSSION | Register here
We welcome comments. Please keep them civil, short and to the point. ALL CAPS, spam, obscene, profane, abusive and off topic comments will be deleted. Repeat offenders will be blocked. Thanks for taking part — and abiding by these simple rules. A thorough explanation of rules of conduct can be found in our Terms of Service. If you have any questions, including why your comment may not be showing immediately after you submit it, be sure to visit the commenting FAQ.