Gasoline prices increase
Several factors contribute to rise in fuel prices
September 23, 1999
Variations in gasoline prices from town to town and the fluctuation of the market from day to day often leads to questions from consumers.
Why and how are the two most frequent questions.
Following the Labor Day weekend, the average price for regular unleaded gasoline in Colorado was up some 2.7 cents more than the last month, bringing the statewide average per gallon to $1.35 a gallon.
But in Craig it’s a different story. The price for unleaded gasoline is $1.49 per gallon, whereas in Steamboat Springs the price hovers at $1.44 per gallon and in Meeker it’s $1.45.
Few can give answers for the discrepancy, citing transportation costs and market value as reasons. Congress protects a distributor’s privilege of not disclosing its profit margins.
According to John Bennitt, public relations spokesman for Conoco, there is no regulation as to how much profit a business can make on the sale of gasoline.
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Residents can take heart in the fact that gasoline prices in Craig are not the highest in the state. Vail, Colo., reports an average cost of $1.55 per gallon of regular unleaded gasoline and Glenwood Springs reports an average of $1.50.
“It’s become a very important concern for people,” said Mary Greer, public relations for American Automobile Association (AAA) Colorado.
The state did not see the decrease in prices that usually follows the Labor Day weekend.
“Traditionally as soon as the peak summer season ends, the demand decreases and prices go down,” Greer said.
According to Oil Price Information Service, the continued increase in prices is consistent with oil analysts’ projections that moves to reduce production by the Organization of Petroleum Exporting Countries (OPEC) would push pump prices higher this year.
Gas prices directly relate to the cost of crude oil because gasoline is the by-product of producing crude oil.
“It’s hard to predict as far as how much prices will reflect and increase in manufacturing,” Greer said.
The price of crude oil is at $24.87 a barrel, an increase over last month when prices were at $21 a barrel.
“Crude oil is almost double what is was a year ago,” Bennitt said.
Last year, crude oil inventory increased because one of the largest purchasers, Asia, was not buying what it usually does. Despite the decline, the production of crude oil remained the same, driving prices down.
Now, the price of crude oil has recovered because of an increase in demand after Asia rebounded and began to purchase more.
According to Bennitt, there is relatively little crude oil production in Colorado and most of the products have been committed to refineries who need the specific type of oil produced by the state, so most crude oil used in Colorado comes from Canada. The cost of transporting the product is passed on to consumers both in getting gasoline to Colorado and then distribution to individual gas stations.
“Craig is a long way from anywhere,” Bennitt said. “(Gasoline) has to be transported from Denver or Grand Junction.”
Prices also increase in summer because of a federal demand for gasoline with a low rate of evaporation to protest low level ozone and the requirement is passed on to customers to the tune of 5 cents per gallon.
Add that to state and federal taxes that account for nearly 40 cents of each gallon of gasoline purchased. The current federal gas tax is 18.3 cents per gallon. Colorado remains in the middle of the pack as far as state gas tax with its 20 cents per gallon charge. In Wyoming, the tax is 14 cents per gallon and in Utah it’s 24 cents. According to Bennitt, in some states municipalities have the authority to levy a gas tax, but that is not the case in Colorado.
Another factor in the price of gasoline is customer choice. The number of gas stations, their association with profit-boosting convenience stores or car washes and the local demand for gasoline each have an impact on the prices individual stations charge.
According to Bennitt, some stations have to make a profit of 10 cents or more on each gallon of gas just so they can afford to have the facility to sell it. Statistics show that building a gas station costs from $2 million to $3 million. Most of that price is spent on underground construction where station owners find complying with federal, state and Environmental Protection Agency standards increasingly expensive.
According to officials with Chevron, gasoline prices are near historic lows. When adjusted for inflation, the U.S. average price of gasoline in 1997 was the third lowest year in the 79 years pump prices have benn recorded. According to the Bureau of Labor Statistics Consumer Price Index, the price of gasoline during the past 30 years increased less than the average price increase for all goods and services.