Fears increasing about $4-a-gallon gas

Kennebec Journal
March 5, 2008

BY MEGHAN V. MALLOY

Staff Writer

Mainers are paying a nickel more per gallon of gasoline than the national average, and Maine gas prices have jumped up 10 cents in the past month, AAA reports.

Rising costs won't stop here.

The trend upward leads some industry observers to believe that Americans could be paying $4 for a gallon of gas by Memorial Day weekend.

The monthly average price for unleaded gasoline in Maine is $3.21, according to the AAA office in Portland. One month ago, the cost to drivers was $3.11.

The national average Monday was $3.16. The cost difference can be a surprise to out-of-state drivers.

Ted Harlow, formerly of Maine, was in Augusta filling up his tank Monday before returning home to Goffstown, N.H.

"In New Hampshire, I paid $3.07," said Harlow, who visits Maine monthly. "Here, it was $3.16. I definitely took notice of that."

Pat Moody, spokesman for AAA in Portland, said the price jump can be attributed to many things.

"The market isn't following the fundamental supply and demand," Moody said. "We're seeing good supply but weak demand, and the prices keep going up."

Analysts, Moody said, anticipate traditional supply-demand dynamics should be restored by spring and summer, two seasons when gas prices traditionally rise.

"We drive more in the summer and use more fuel," he said.

Refining also enters the equation, as gas stations typically sell different blends of fuel during warmer months than they do in the winter. Moody said different additives, which vary by state, also alter gas prices.

Another state-by-state variable affecting pump prices is gas taxes, which range from about 26 cents in Alaska to just under 64 cents in California, according to API, a national trade association which represents members of the U.S. gas and oil industry.

In Maine, the gas tax sits at 47 cents.

Industry insider Jason Toews doesn't fully agree that supply and demand is the only thing responsible for high gas prices.

"I don't completely agree that demand is weak," he said. "I mean, crude oil demand is at an all-time high, and the price of that makes up about half the cost for gasoline."

That assessment was backed up Tuesday on Capitol Hill by a top Energy Department official, Guy Caruso, head of the department's Energy Information Administration

Caruso told a Senate hearing that supply and demand would suggest a price of about $90 a barrel.

Market speculation on energy prices may have added as much as 10 percent to crude oil costs and the peak may be yet to come, he said.

"Something is clearly going on," he told the Senate Energy and Natural Resources Committee.

Toews is co-founder of GasBuddy.com, which lists the lowest and highest gas prices throughout the United States and Canada. Figures are compiled from drivers who submit prices they see at local gas stations.

Toews expects $4 gas by summer. He said drivers appear to have become "desensitized to high gas prices."

"$3 per gallon doesn't shock people anymore," Toews said. "People are learning to simply budget for it."

Brunswick resident Dennis Guerrette hopes he doesn't ever have to pay $4 per gallon, "but it looks inevitable."

Guerrette was at the Irving station on Western Avenue in Augusta Monday afternoon to fill up.

"Looking at the condition of our roads," he said, "it's actually kind of discouraging. Our roads look horrible, and we're paying these high taxes for gas and oil, but not to fix up the roads."

Meghan V. Malloy -- 623-3811, Ext. 431

mmalloy@centralmaine.com

The Associated Press contributed to this story.