Gas prices guzzle more of local budgets
County consumers, businesses feeling pinch at the pump
Wednesday, March 16, 2011
Rising gas prices
$3.67: Average price per gallon on Wednesday in Vancouver
$2.95: Average price per gallon one year ago
Vancouver resident Jesse Bauer, 30, has been pinching pennies since he lost his retail management job nearly a year ago. The last thing he needed was ballooning gas prices.
But that’s been the reality at the pump for several months now, driven by multiple forces out of Bauer’s control, including everything from the uprisings roiling the Middle East to how Washington state gets the oil it refines for fuel consumption. The average price of a gallon of regular gas in Vancouver was $3.67 Wednesday, up about a penny from Tuesday and up about 72 cents from a year ago. For a 15-gallon fuel tank, that’s an extra $10.80 for each fill up. The national average is $3.55.
In response, Bauer said his family has further tightened its monthly budget. “We try to purchase food that lasts a long time,” he said.
Bauer’s answer to high gas prices is just one example of how consumers and businesses in Clark County are responding to rising fuel prices driven mostly by the high price of one of the most important global commodities: oil.
A Vancouver trucking company, for example, has seen its diesel fuel costs surge by tens of thousands of dollars a month. Consumers like Bauer, meanwhile, say they’re watching what they spend more closely. Economic experts disagree as to whether high fuel prices pose a significant risk to a slow economic recovery.
The Federal Reserve, the central bank of the U.S., said this week the economy is on “firmer footing.” It also said it expects the upward pressure on inflation caused by increases in commodity and energy prices to be temporary in nature.
However, international analyst and economist Alan Beaulieu, who recently spoke to business leaders in Vancouver, said the U.S. already is importing inflation in the form of higher world oil and food prices. “Inflation is global,” he said, and the U.S. is not immune.
Trucking costs rise
Whether high fuel prices are a temporary or long-term problem, Holly Wren, vice president of Vancouver-based Child Truck Line Inc., knows her business isn’t protected from them.
Her trucking company, which employs 32 people and deploys 30 18-wheelers to haul bulk items for the paper and food industries, depends on reasonably priced diesel fuel. In just a short time, she said, high oil prices have driven the cost of fueling the company’s big rigs from about $42,000 per month to $78,000 per month.
She can pass on the extra fuel costs to customers, but that comes with dangers of its own: Customers frustrated with higher rates can go find other trucking companies.
Wren said her company has cut other costs to cope. It has reduced office cleanings from once a week to once every two weeks. A self-described “hoarder,” Wren said her company’s also been stashing away savings as a buffer against rising fuel costs.
She said her company survived the run-up in oil prices before the Great Recession hit. That’s when the price of a barrel of oil kissed $140 in the summer of 2008. That’s also when, in June 2008, the average price of a gallon of regular unleaded gasoline hit its highest level on record in Vancouver: $4.35. Diesel peaked at $4.96 in July 2008.
The price of a barrel of oil was trading at about $97 Wednesday.
Ultimately, Wren said, there’s not much you can do when a globally traded commodity like oil skyrockets. “That’s a cost you can’t control,” she said.
Consumers react differently
Orchards resident Jennifer Utterback, 31, works as a seamstress for The Drapery Man Co. in Vancouver. She works only a few blocks away from the Arco Quick Stop on Mill Plain and Grand boulevards, where she went Tuesday to fill up her Kia Sedona minivan. The Arco station’s price for a gallon of unleaded was $3.55.
Utterback figures that she and her husband, who commutes to Portland for work, are spending roughly $20 to $35 a week on gas. She said she hopes the price comes down soon, especially since her husband’s commute consumes the most gas.
For now, though, she said, “we just deal with it.”
What puzzles her, Utterback said, is the lack of stability in gas prices. Why, she asked, is it so extremely high?
At the Chevron Food Mart along East Mill Plain Boulevard, Vancouver resident David McCallum, 44, paid about $40 to fill up his car. He shrugged off the high gas prices. “It’s going to cost a couple more dollars,” he said. What bugs him, he said, is that he suspects high gas prices are at least partly due to “gouging by oil companies.”
Bauer, who recently filled up his Chevy Suburban at the same Chevron Food Mart, said he’s focusing on making sure his family doesn’t spend money on “useless expenses.” He said he’s well aware of the problems in the Middle East and of the United States’ dependence on oil. The U.S. hasn’t really done much to produce alternative fuels, he said. “It just seems like all we’ve been looking for is crude oil.”
Multiple influences drive price of oil
Market speculation. Retail competition. Middle East flareups. The thirst for oil from China and India.
All are factors that determine the price of oil, which, according to the U.S. Energy Information Administration, now makes up roughly 68 percent of what we pay for, on average, for a gallon of regular gasoline. The rest we pay in taxes (15 percent), distribution and marketing (10 percent) and refining (7 percent), according to the EIA. Washington state does not produce any crude oil. Much of the oil the state receives is imported by tanker from Alaska.
Although accusations and rumors of price gouging abound, in Washington state there has been no evidence of price fixing. A 2007 study of high gas prices by the state Attorney General’s Office found no evidence of illegal activities that would increase the price at the pump.
Isolation a big factor
Marie Dodds, spokeswoman for AAA Oregon and Idaho, said a big factor that influences the price of gas in Washington state is the state’s relative isolation from the United States’ system of oil pipelines and refineries. The eastern part of the U.S. has a robust system of pipelines, she said. Look at it on a map and it “looks like a big pile of spaghetti on a plate,” she said. When you look at the western part of the U.S., “it’s like a few noodles,” Dodds said.
That lack of oil infrastructure translates to fewer options in getting gasoline to Washington retail markets. As a result, Dodds said, “we tend to pay more most of the time.” Indeed, the average price of regular gasoline on the West Coast is $3.84, according to the EIA. In the New England and Central Atlantic regions, it’s $3.58 and $3.57, respectively.
Dodds said that, based on AAA analyses over the years, the tipping point for people to start cutting back on their use of gas is when the price hits about $3.75. That’s when you see people start to carpool, take mass transit or otherwise trim their budget for gas, she said.
Dodds said there’s a lot of speculation and fear driving up the price of oil. The tsunami that rocked Japan is one factor that could drive the price back down. There will be less demand for oil there because of that tragedy, Dodds said. Japan’s is the world’s third-largest economy, after China and the U.S.
Looking ahead, Dodds said, “Gas prices will probably taper off here a bit.”