State gas prices exceed $2

ML service stations expect same

Here's one record breaking not many people are going to be much for celebrating.

For the first time, gas prices in Washington have gone over the $2 mark.

"What it is is, since they've kept records of gasoline prices, it's the highest it's ever reached," said David Overstreet, public affairs director for the American Automobile Association. "It's the highest price that we've ever had recorded for a gallon of gasoline in the state."

Overstreet said that those numbers are unadjusted for inflation. He said that that means "actually we're no worse off than we were in the 1980s," although that's no comfort to those people seeing the prices on gas pumps.

Overstreet said that the price of regular unleaded gas in Bellingham was $2.02, $2.01 in Olympia and $2.03 in the Seattle-Bellevue-Everett area. Yakima and Tacoma are both close, at $1.99.

"There's no indication that prices are going to go down," he said. "We're moving into the high demand time of the year, which starts with the Memorial Day holiday [May 30]. From our perspective, and we don't have any way of accurately predicting, it may be after Labor Day [Sept. 6] before we see any easing of prices. There's always a lot of intangible factors out there; it really is impossible to predict."

Those factors include the price of crude oil being over $37 a barrel and low inventories because of high prices, Overstreet said. The U.S. is also importing significant amounts of oil, which is more expensive due to worldwide demand.

"We also are at a period of time when refineries are having to produce at least 15 types of specially formulated fuels to meet air quality standards in various parts of the country, so that runs up the cost because refineries have to retool and produce summer grade fuels," Overstreet said.

In addition, the Organization of Petroleum Exporting Countries (OPEC), which provides 40 percent of the world's oil, has decided to curtail production, and the unrest in Iraq is also a factor, Overstreet said.

"Those are all things that play into the price of gasoline and also where that price may go in the future," he said.

Scott Backman, owner of full-service station Auto Werkes, which is doing business as Hopkins Brothers Automotive Service, said he wondered why customers are being subjected to an economic pinch when the country has a lot of control over the oil fields in the Middle East and half of the oil wells in Texas aren't dry, but are just shut off.

Backman said that, as one of the full-service stations in town, he gets a lot of flak for the high prices from customers.

"Some of the gals that come in here, they just don't care and they'll pay the price," Backman said. "As far as me buying the bulk fuel, I pay just as much as they do at a self-service station down the street."

Backman said that in reading newspapers "and whatnot," he expects Moses Lake will also see gas prices go over $2. From what he's heard, prices could go up to $3, he said.

Jeff Hagemann, energy manager for Cenex Harvest States, said he was surprised to see the prices hit this quickly.

"As I've looked at the market, I knew we were going to be topping a $2 retail price, but I really didn't expect to see this until June or July," he said. "Our hope was that the Environmental Protection Agency would issue a waiver on the clean burning fuel requirements that would allow foreign manufacturers to import into the U.S. Last week the EPA declined that waiver and thus we saw a fairly rapid increase in wholesale prices."

Hagemann said that according to the week's Department of Energy report, the implied demand for gasoline in the U.S. is 9.255 million barrels a day, when it was 8.358 million barrels a day during the same period last year. A barrel is 42 gallons, he said.

"What's happening is, as the economy picks up compared to last year, so does the demand for gas," Hagemann said. "The problem that we have is, we are seeing increased demands for the product, but we don't have any increased capacity for the manufacturing of these products. That's why imports of finished product is so critical to the United States."