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Front Page » November 23, 2006 » Local News » Carbon gas prices register at levels consistent with pump...
Published 2,703 days ago

Carbon gas prices register at levels consistent with pumps in rural Utah


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By RICHARD SHAW
Sun Advocate publisher


Motorists lifting the nozzles at local gas pumps face paying higher prices than drivers refueling at stations along the Wasatch Front. However, Carbon County's gasoline prices are comparable to the costs reported in most rural areas in the state. In a couple of rural counties, motorists are paying even more at the pump.

Although gasoline prices continue to drop, some county residents are concerned that motor vehicle fuel prices haven't decreased enough in the local area.

But surveys by users throughout the state show that while rural areas continue to pay more for gasoline and diesel fuel than the Wasatch Front, the prices among the country outposts are similar in nature. Carbon's lowest prices fall into the lower end of the higher priced rural category.

As of Monday morning a look at utahgasprices.com shows that Carbon's lowest price is ranked as last among the highest prices in the state reported in the previous 48 hours. Carbon's price at $2.44 a gallon at a local station is matched by stations in St. George and Green River. The highest individual station prices in the state are in Salina and Delta, with the Interstate 70 interchange in Salina showing $2.59 a gallon while two stations in Delta registered $2.49 for fuel.

In the last two months, gas prices in all areas of the state have fallen considerably, going from being some of the highest prices in the country to just edging over the national average along the Wasatch Front.

However, in the rural areas of the state the price is generally above the national average.

According to a national gas temperature map (gasbuddy.com) most of Utah falls into an intermediate zone, where prices are close to the middle.

The Wasatch Front has the lowest prices ($2.09 in the Bountiful area on Monday) while the highest prices can be found in Grand County, where the prices are the highest overall at around $2.55 a gallon. Cache, Tooele, Juab, Washington and Iron counties reflect a spectrum of prices, with costs ranging from $2.33 to $2.42 per gallon.

Nationally the highest prices are in California, western Nevada (the Reno area) and in some places in Washington state ($2.68 to $2.86 per gallon). The lowest prices in the country are in the South where the price of gas in some places is as low as $1.98 per gallon.

All state and national averages are just that - averages. There are individual places in the South where gas can be much more and on the West Coast where it can be much less than the average.

Analyzing these areas, however, does not answer for the reason that gas is higher in Carbon County than it is in Spanish Fork. There have been a lot of explanations for it, but the main thing jobbers and petroleum associations quote as reasons for the cost difference is hauling the fuel to a more remote place. Many consumers in the area can't understand how it could cost 30 or more cents more per gallon to haul fuel to eastern Utah. Still, the cost of diesel to power the trucks that haul the fuel is high and large trucks hauling thousands of gallons of gasoline get only three to four miles per gallon. Then there is the cost of maintenance, labor and all the other things that go with using heavy load trucks.

The cost of hauling could also increase over the next couple of years. New pollution devices that are slated to become mandatory on diesel trucks will further lower the mileage of those transport vehicles, possibly meaning not only increases in fuel that is hauled to eastern Utah but all other goods that are shipped by truck or rail.

In September, Gov. Jon Huntsman appointed a panel to study why gas prices in Utah were so high. At the time the governor said that his office was "anxious to do all we can to get results in an area as important as gasoline prices for all Utahns."

Less than a month later the panel came back with some answers. While it blamed many different factors, it said some gas retailers had kept their prices high and were making more profit than usual on the fuel they were dispensing. Since that report came out many of the prices across the state have dropped dramatically. At the time the report was released, the governor's office said that if the prices didn't fall much closer to national averages within a month, then Huntsman would look for other options to handle the situation.

But now, over a month later, the prices have dropped closer to national averages, mostly along the Wasatch Front where the bulk of Utah's population lives. In rural areas the prices are still higher, but gasoline suppliers say that is the way it has always been. Rural areas of the state, even in the days of cheap gasoline, have always seen higher prices because of where they are located.

One of the most interesting things about the governor's panel's study was that they sent surveys to two dozen gasoline station operators throughout the state asking them about pricing, costs, distribution and other factors. Of all those surveys only a handful came back and all were from stations in rural Utah.

A process that the petroleum industry uses to make money is arbitrage. In the oil industry, as in other markets, that is the name given to a business practice in which a company buys a product for a low price and then hauls it to a different market and sells it for a higher price. However, based on the state study that is not what is appearing to be happening in rural Utah. Yet it is being done for markets farther away. The Arizona semi-tanker that exploded in the Red Narrows in Spanish Fork Canyon last year was hauling gasoline from a refinery where production costs are low to a market where the price was higher.

There have also been a lot of questions about how prices of fuel rise and fall. Gasoline distributors and stations usually price their fuel based on what it will cost to replace what they have on hand. That means if crude oil prices go up a certain amount in a day the refineries know it will cost them extra money to replace what they have sold. That means they have to charge their customers for the increase. The domino effect takes place all the way down to the retailer who must also increase prices to replace what they have sold that day. But when the price of crude falls, the more costly fuel still remains, and must be sold at the present price until it is relatively gone because a higher price was paid for it.

Utah is unique in that most of the gasoline refined in the state comes from very close crude sources within the state and surrounding Rocky Mountain states. An exception to that is that some of the crude comes from western Canada. Utah also imports some refined fuel from Wyoming, New Mexico and California. Because sources are close that sometimes keeps prices down, like last spring when Utah had some of the lowest prices in the nation, even in the rural areas as compared to the national costs. Because of this, Utah is also more insulated in some ways from the costs associated with political upheavals in other parts of the world.

However, that same self reliance also can create some problems when an economy booms, as it is in some parts of the state where the population centers are located. With that the demand is high, and yet the refining capacity is still the same so that creates a crunch which drives prices higher. At present the refineries in Utah produce over a billion gallons of gasoline a year, with most of it being consumed within Utah's boundaries.

However, despite the close crude supplies and localized refining capacity, the states oil prices are often affected by international events or disasters such as Hurricane Katrina, because oil is a commodity and the system of international supply and demand affects everyone who uses or purchases it.



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