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Front Page » February 5, 2009 » Carbon County News » Tight supplies along with economy influence prices at gas...
Published 2,001 days ago

Tight supplies along with economy influence prices at gas pumps


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By RICHARD SHAW
Sun Advocate publisher

The decrease in gas prices from last fall has been reversed. In fact, prices in Carbon County and across the country are going up constantly.

Many people see the poor economy as the reason for the increase and in a way that is true. The rising prices now are a direct result of refiners cutting back production late last year because of falling consumption.

People were and still are driving less. Three million Americans are unemployed, while a significant number of people commute by car to work each day.

Travel of all kinds is also down so the consumption of all types of fuel has decreased.

Based on national figures, when unemployment exceeds 7 percent, gas consumption is generally affected.

In December, the national unemployment rate rose about two-tenths of a point higher than 7 percent.

In the last few weeks, gas prices have gone up about 15 percent nationally due to the shorter supply.

Last summer, refiners were reluctant to cut supplies. Prices were high and profits were up. But then fall came, with the credit crunch and cascading unemployment.

According to information from the American Automobile Association, mid-January figures showed that the average price of gas in the continental United States was about $1.87 per gallon.

The lowest prices in Utah are in Bountiful, where gas was $1.45 per gallon. The highest gas pump prices are seen is in Blanding, where regular unleaded is $1.99 per gallon.

In Price on Wednesday, the lowest price for gasoline was $1.64.

During the span since the economic downturn, gas dropped to $1.55 a gallon locally before Christmas, according to Matt Marasco, manager of Castle County Oil in Price.

"It really is a function of supply and demand and the economy and the way it has been recently and is now shows that," stated Marasco in an interview on Wednesday.

Part of what will determine national gasoline prices in the future still depends primarily on the economy, according to financial analysts.

If demand declines more because of lower employment, the gas companies might tighten supply even more. If employment starts to rise and people begin to spend more money, the prices for fuel could rise because supplies will become tighter until refiners can turn out more product.

The lag time between the a decline or an increase in demand is often weeks or even a month, so prices could vary significantly.

For instance, current supplies are tighter on the West Coast than around the Salt Lake City region.

The Wall Street Journal reported last week that national authorities on fuel supplies indicate the market seems to be returning to normalcy. It also reported some refiners are restarting units that have been idle since December.

Part of what has happened to demand appears to have not been part of the economic downturn.

When gas prices went sky high last summer, some analysts indicated that many people moderated driving habits, bought fuel efficient vehicles or took mass transit.

Having made the adaptations, many people have stayed with the changes rather than revert to old habits. It seems drivers are looking forward and realize that gas prices may reach $5 a gallon or more.

Car sales are down from last year, particularly in the area of sports utility vehicles and pickup trucks.

On Monday, all American car makers reported that sales had dropped between 30 percent and 40 percent. Foreign manufacturers also reported sales down around the 30 percent mark. Much of the market degradation came in SUVs.

When gas prices dropped in the past, Americans generally began purchasing bigger vehicles again. But that doesn't seem to be happening in the current case. Americans are purchasing vehicles that use less fuel and the situation will eventually affect gas prices.

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