September 19, 2014
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Early rise in gas prices could forebode $4.25 by July
John Howell
IT GOES UP AND UP: While gas prices can tick down, Richard Pacheco of Warwick thinks it's all part of the scheme to get motorists accustomed to higher and higher prices. Here he fills up at the Stop & Shop station on Warwick Avenue and Sandy Lane.

Prices at the pump have gone up 16 cents in the past 17 days. Since the start of the New Year, consumers have seen an unseasonable increase at the pump, which has experts worried about prices in the months to come.

“When prices rise 16 cents as early as January, that’s cause for concern,” says Lloyd Albert, senior vice president of public and government affairs for Southern New England AAA.

“It’s ridiculous,” said Marie Resendes while fueling her car yesterday morning at Hess at Hoxsie Four Corners. “It doesn’t make sense to me.”

According to the Rhode Island AAA, the average cost of regular unleaded gasoline as of yesterday was $3.49 per gallon. Last year at this time, fuel was $3.20 per gallon.

Gasoline isn’t the only fuel cost that has increased.

According to the RI Office of Energy, the average home heating oil price as of Jan. 9 was $3.81, up from last year’s average of $3.22. Breaking the trend of increasing fuel cost is natural gas, which is at a low of $3.03 per million BTUs for an average price this month.

At a time of the year when gas prices are usually at their lowest, consumers like Resendes are confused to see their expenditure at the pump on the rise.

Historically, prices begin to increase in the spring, when demand due to peak summer travel increases. However, if prices continue on an upward slope from this point on, Albert said we could see prices around $3.75 to $4.25 come July.

“This isn’t good news for commuters,” he said.

Albert said there are two reasons for the unusual spike in prices.

The primary problem, he said, is the threat of disruption of oil transport via the Strait of Hormuz, a narrow waterway in the Persian Gulf through which the bulk of sea borne oil is transported. Iran’s threat of closing this major thoroughfare has triggered oil traders to raise their prices, which in turn affects the price at the pump.

Another issue, said Albert, is occurring in Nigeria, where the president has removed fuel subsidies. This in turn has lead to a major strike by oil workers in the country. The United States gets about 8 percent of its oil supply from Nigeria. Negotiations are underway with protesters, but if an agreement is not reached, the price of a barrel could jump from $5 to $10, which would translate to a 10 to 15-cent increase at the pump.

Those fueling their vehicles yesterday wondered why the U.S. couldn’t absorb some of the increase, and use stockpiled oil to help consumers.

“They’re higher than they need to be,” said Kim Dawkins of the prices. “Oil companies certainly have more control over that.”

Dawkins said she thought being at war was a major reason for higher oil and gas prices, but now that the war is over, she expected to see a drop.

“Why aren’t gas prices dropping instead?” she said.

“It’s truly a global market,” said Albert. “We’re not insulated from what’s happening [around the world]. Results happen fairly quickly in a global market.”

Should negotiations fall through in Nigeria, Albert said markets here would see effects within a month.

“We wouldn’t see the price go up today,” he said, “but in a week or two.”

The increased price hasn’t stopped people from fueling up and hitting the road.

“It’s typical,” said a man fueling his car yesterday. “I’m biting the bullet.”

“We don’t have much choice,” said Dawkins. “Until we have more alternative fuel, there’s not a lot we can do. We’re at their mercy.”

According to AAA data, the average driver in the U.S. spent $4,100 on gas last year. Overall, Americans spent $489 billion on gas or diesel last year, up $100 billion from the previous year.

“In 2011 we were paying an extra 25 percent on gas,” said Albert.

Lloyd said fuel prices in Rhode Island are generally 7 or 8 cents higher than the rest of the country, due to a 31-cent gas tax. However, though Rhode Island prices are higher than Massachusetts, they’re lower than Connecticut, and substantially lower than states like California.

“We’re within the average range,” said Albert.

Despite the laws of supply and demand, an increase of demand has not been a factor in increasing fuel costs this January.

“In the middle of all of this, the demand is actually lower in the last six months. It’s down 2.4 percent,” said Albert.

But he said external and global factors are still ramping up fuel costs. What this means for consumers in the coming months is still unclear.

“We’re not sure if this is a harbinger of things to come,” he said.


Comments
1 comment on this item

Even after considering greed, corruption, and political collusion, there is still the primary significance of limits to natural resources, and the average American' consumer's failure to adhere to conservation efforts. We need to shore up public transportation to get ordinary Americans out of their cars during offtime from work, and peak consumption time,. Attach a heavy usage tax on ordinary households with more than two automobiles, and on gas guzzling cars and SUVs for non-business use., The most important step is an accelerated development of alternative energy sources, and vehicles, as well as subsidies to families wanting to convert to solar energy, et al, for heating, cooking, and other energy sources around the home. Supply and demand is the rule of thumb for rising costs, and it is hardly going to change in the future.

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