Price of crude oil may translate into higher gas prices

PHOTOS: 1-3,5-6. Local gas retailers are saying business has been good, but the futures market on crude oil may continue to drive prices higher.<br>4. Ken Heimbigner gets gas at Lake's Market Wednesday afternoon. Local gas retailers are saying business has been good, but the futures market on crude oil may continue to drive prices higher.

by Matthew Weaver<br>Herald Staff Writer
| August 5, 2004 9:00 PM

Costs may still be up after summer's end

It's hard to say for sure, but gas prices may remain high even after the end of the high-demand summer season.

David Overstreet, public affairs director of the Spokane office of the American Automobile Association, said that as of Tuesday, crude oil was trading at $44 a barrel.

"Crude oil is the single largest component in the cost of gasoline," he said. "Analysts say it accounts for 40 to 50 percent of the price that motorists pay at the pump."

Overstreet noted that AAA does not predict where gas prices are going to go, but follows trends. He said there is usually a five-week lag between the price of crude oil and the price of gas at the pump. If crude oil stays high, he said, the price of gas will probably go back up again.

Overstreet said that the futures market is also driving gasoline prices up as well, because of being in the high demand season for gas and because of analysts' concerns over supplies in the Middle East.

But the high prices aren't keeping people from traveling. Overstreet said that indicators show travel is up over last year, in both automobile and air travel. He said part of that could be because prices started to drop recently and because of pent-up demand due to more people taking a vacation this year, instead of skipping one in the wake of Sept. 11.

The mood seems a little better locally.

Becky Sharp, manager of JR's Economart, said that prices have actually been better than early summer predictions.

"It's a lot better than what we heard it was going to be," Sharp said. "I heard at the beginning that it was going to get up to $3 a gallon. (We're) not there, and that's very nice."

Sharp said her station is owned by a corporation, and so she has no clue as to future pricing. Aside from the typical consumer question as to whether the prices will go up again, she said that there's been no change in reaction from customers.

"We're actually very busy," she said.

Peter Kim, manager of Lake's Market, also said that the prices for his store have been about the same rate, and said that customers have said he has a good price. But he does hope that prices decrease after Labor Day, as his prices are a little high.

"We need prices down about 50 cents," Kim said, noting that he has nothing to do with the pricing of his product. "I'm the retailer. It depends on the supplier price."

"The typical scenario is that after Labor Day, as we get out of the high demand season, prices tend to go down," Overstreet said. "This year has been atypical from the beginning. Prices could start to come down. On the other hand, if the price of crude oil stays up there, it may not come down after Labor Day."

Overstreet said a lot of factors could come into play, noting that any kind of problem, such as a pipeline leak, could affect prices.

"There's always those intangibles out there; it's impossible to predict," he said. "There's never any guarantees."

But Overstreet does think the same situation could arise this time next year.

"Long term, we still have the issue of limited refining capacity and increased demand," he said, adding that the increase in demand has been significant worldwide. "Analysts will tell you that the only country that has any significant excess refining capacity is Saudi Arabia."

If the limited capacity for refining and increased demand continue, along with the annual refining of expensive clean air fuels each summer, Overstreet said he sees the same situation arising next year.

"If all of those factors come together, I see us kind of in the same boat next year," he said.