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Friday, September 2, 2005
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Is the sky the limit for gas?
Staff Writer Dick Gotvald has tried to keep his gas as cheap as possible.
Gotvald, co-owner of Gotvald Implement in Hillman, was selling unleaded gasoline at $2.39 two days ago. On Tuesday, after a new gas delivery, he was forced to sell at $2.69. On Thursday he was forced to raise his price to $2.97, which was about on par with other service stations in the area.
"And everybody's going up from there," Gotvald said. "Something tells me the rising price of gas isn't going to quit just yet."
The sale of gasoline hit a record high Wednesday, selling for $2.99 a gallon in most of the Brainerd area, matching the state average. Save Foods in Brainerd was selling gas at $3.09 a gallon Thursday. Gas has sold as high as $3.36 a gallon in Gilbert, and as low as $2.63 a gallon in Hayfield, according to the Web site MinnesotaGasPrices.com. A month ago, the state average for a gallon of gas was $2.15.
Kelly Bevans, owner of the Mobil service station in north Brainerd, said the standard comment he receives from his gasoline buyers is, "What are you doing with all this money?"
If he lowers his prices too far, Bevans said he'll lose money. If he raises his prices too far, no one will buy from him. The state of Minnesota has a law that bars stations from selling gasoline below cost, which means they have to charge at least 8 cents a gallon more than they pay to cover wholesale costs plus taxes and fees. However, state law doesn't stop gas stations from raising their prices as much or as often as they deem appropriate.
"The impact can be devastating on a retailer," Bevans said. "The cost keeps going up but the profit goes down."
Gotvald said he has received similar comments, and unfortunately he doesn't have an answer.
"They all got that funny look on their face, everybody just can't believe they're paying $50 instead of $20," he said. "They all have got about the same attitude but what are you going to do?
The answer is that along with their customers, service stations are paying more for their gasoline.
For the past week, Gail Weinholzer, director of public affairs for AAA Minnesota/Iowa, has watched gas prices in Minnesota jump around between $2.50 a gallon and $3 a gallon, the product of the destruction left in the wake of Hurricane Katrina, which has shut down more than 90 percent of the oil refineries across the Gulf Coast area of Louisiana, Mississippi and Alabama.
"Volatility is the word," Weinholzer said about the current state of gas prices.
The problem isn't a shortage of crude oil used to make gasoline, she said. The problem is the Gulf Coast refineries that converted 30 percent of the country's crude oil to gas aren't operating. And until it is known how much damage the refineries have sustained Weinholzer said there is now way of guessing how much gas prices will increase or decrease.
This past week Bevans was told by his supplier that if he wanted gasoline for the Labor Day weekend, he would have to place his order that day, otherwise his supplier wasn't sure when Bevans might be able to deliver more gas.
Gotvald, whose implement company also sells farm equipment, said he's heard from many customers who won't be buying new farm equipment while gas prices are high. He said his supplier has noted gas prices could continue to climb.
Crude oil used to make gas is a commodity, and the price of a barrel of oil -- which for the past week has hovered at or near a record high of $70 -- is based off market speculation. Combined with the overall demand, the war in Iraq and recent lack of productivity from the Gulf Coast states, gas prices have skyrocketed.
Bevans described the situation as a vicious cycle, for motorists and retailers.
"For everyone it becomes a self-fulfilling situation where you want to buy as much as you can now. I think there's a lot of head shaking going on," he said.
As far as gas sales go, Bevans said he has probably had his best week -- even with gas reaching $2.99 a gallon Wednesday.
"I think people are just resigned to the fact that they have to buy a certain amount of gas at these prices, that gas prices are going to be higher than they were," Bevans said.
Both Bevans and Gotvald said they were sympathetic to motorists' concerns with rising prices.
While Gotvald said he expects gas prices to continue to climb, Weinholzer said she would hope to see a drop in prices within a week if Gulf Coast refineries are found to be undamaged by Hurricane Katrina.
"But until we get an assessment, anything at this point is strictly guessing," she said. "There's a lot of hyperbole out there because when we break $3 a gallon, people start talking about when we're going to break $4. It's a popular conversation topic."
Bevans preferred to stay optimistic.
"I do believe we'll probably see some relief by mid-September," he said. "That's not something I know, it's just out of optimism of getting through Labor Day, cleaning up from the hurricane and if we see improvements in Iraq."
MATT ERICKSON can be reached at matt.erickson@brainerddispatch.com or 855-5857.
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