High demand inflates prices

By Ed Brock

After a recent trip to California Salvador Delamora of Riverdale is glad to be back in Georgia where he can fill the tank of his minivan relatively cheaply.

"Over there you get it for $2.15 a gallon," said Delamora as he was pumping gas at the Speedway gas station on Tara Boulevard in Jonesboro.

At $1.48 a gallon for regular gas the Speedway has some of the lowest prices in the county, and Delamora said that's one reason why he stopped there.

The average price for gasoline in the Atlanta area was $1.58 a gallon, just below the high for the state in Savannah where the price is about $1.60 a gallon, according to AAA Auto Club South. High demand and low supply, combined with environmental restrictions are some of the reasons for the near record high prices in Georgia and the rest of the nation, said Ric Cobb with the Georgia Petroleum Council.

The Energy Department reported Monday that nationwide retail gasoline prices averaged $1.72 per gallon last week. Meanwhile, the price of oil surged to $37.44 per barrel on futures markets, the highest level in more than a year, in part because of the rising cost of motor fuel.

"The primary reason is the price of gasoline is tied to the price of crude oil," Cobb said.

And the price of crude oil could continue to increase as the Organization of the Petroleum Exporting Countries (OPEC) implements a planned 1? million barrel-a-day cut in production. The United States imports about 62 percent of its crude oil, Cobb said. He couldn't speculate on how long the prices would continue to rise.

"I've never seen gas prices reach $2 a gallon in Georgia, and I don't think we'll see that now," Cobb said.

A couple of pumps away from Delamora on Tuesday, Mike Lipham of Jonesboro said he hasn't seen prices this high since 1974. Lipham said America is too dependent on imported oil.

"If the United States would go ahead and tap the oil fields in Alaska we wouldn't have to rely on Middle Eastern oil," Lipham said.

Another factor in the rising price of gas is the regulation of the industry under the Clean Air Act, Cobb said. Those regulations require special kinds of gasoline for certain markets.

There are 18 different gasoline varieties going to 45 different markets, Cobb said.

"What this means is it takes all the flexibility out of the market," Cobb said.

In other words, the three refineries that provide the special "boutique" gasoline have to send individual batches of gas to different locations rather than simply keeping their pipeline full of regular gas to send anywhere, Cobb said.

Nationally, market experts are monitoring the high demand for gasoline.

"Gasoline demand has been pretty spectacular of late," said Tom Kloza, director of Oil Price Information Service, a Lakewood, N.J., publisher of industry data.

The most recent statistics from the Department of Energy show that gasoline demand has been roughly 3.7 percent higher than last year over the past four weeks. At the same time, nationwide supplies of gasoline are 1.2 percent below year ago levels at 220.4 million barrels, and 5 percent below the 5-year average.

Average daily gasoline consumption for the month ended March 5 was about 8.9 million barrels, up from 8.5 million barrels a year earlier.

Analysts attribute this increase to improving economic conditions, rising population and consumers' preference for gas-guzzling SUVs.

"Year after year, we have increasing demand, even throughout the recent economic difficulties," said AAA spokesman Geoff Sundstrom.

"For most people, their use of gasoline is inelastic," Sundstrom said. "That is, in the course of a typical day, they need to drive back and forth to work, get their kids from school and go to the supermarket."

At most, Sundstrom added, there might be "an incremental response to higher gas prices."

In the future, Sundstrom believes Americans may shift to more fuel efficient vehicles again ? as they did in the 1970s when the country faced gasoline shortages. Only this time, the response could be purely price driven, he said.

What's worrisome right now to Kloza and other analysts is that gasoline demand barely tapers off as much as it used to during winter, keeping pressure on the domestic refining industry year round.

This is the time of year when refiners temporarily shut down to conduct maintenance before ramping up production of special blends of cleaner-burning gasoline required for the busy summer driving season. As a result, supplies tend to contract.

Kloza believes U.S. gasoline demand could average 9.5 million barrels per day or more this summer.

Delamora shrugged when asked if he thought the gas prices would ever come down.

"It goes down two or three cents, that's it. Then it goes back up," Delamora said.

The Associated Press contributed to this article.