Gas prices remain level despite Gulf oil spill

Published 8:44 pm Friday, June 4, 2010

Alabama gas prices should not be affected by the oil spill in the Gulf of Mexico, but a bad hurricane season could cause a possible increase.

Clay Ingram, public relations and marketing manager for the Alabama American Automobile Association, said he thinks Alabama has seen its highest prices for 2010, with the largest increase having occurred in March.

States vary in standards for refined oil, or gas.

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California, for example, must have a cleaner burning fuel, which requires more steps in the refining process. Therefore, gas prices are higher.

“Typically, we (Alabama) are in the average classification,” Ingram said. “But, during the summer months, we have to burn cleaner fuel.”

“March through September we (Alabama) have to burn a better fuel, (equaling) 3-to-4 cents per gallon extra,” he added.

A bad hurricane season, however, can present problems.

“If we have some damage to refineries or oil pumping platforms, it could affect our supply output,” Ingram said.

Past hurricanes like Hurricanes Ivan and Katrina caused prices to go up dramatically, and Jeanna Barnes, director of the Pike County Emergency Management Agency, said the National Oceanic and Atmospheric Association is predicting an “active to extremely active” season for the Atlantic basin.

According to Barnes, the NOAA is predicting a 70% probability for 14 to 23 named storms (top winds of 39 mph or higher), including 8 to 14 hurricanes (top winds of 74 mph or higher), of which, 3 to 7 could be major hurricanes (category 3, 4 or 5; winds of at least 111 mph).

“If this outlook holds true, this season could be one of the more active on record,” said Jane Lubchenco, under secretary of commerce for oceans and atmosphere and NOAA administrator.

The oil spill in the Gulf of Mexico presents problems for many, and reports confirm that oil has reached the coasts of Florida.

But the spill is not expected to affect gas prices.

“This was a new experimental well, and we were not relying on that well as a source of production,” said Ingram.

“We’re not missing out on that oil because we never used it.”

He also says that the demand across the country is weak.

“Our demand is less, allowing us to build stockpiles,” he added.

“Our inventory is the highest we’ve seen in 20 years.”

There are also a combination of other things that go into factoring gas prices.

“It depends on what the refineries pay for a barrel of crude oil. They then sell the gasoline to the wholesale distributers, who in turn sell to the retail stations where you and I buy gas,” Ingram said.

Throughout the stages of transfer, markups occur.

“Usually, it’s not that much of a markup,” Ingram said.

“3-to-4 cents per gallon, sometimes more or less depending on the situation.”

A state’s location in relation to refineries also plays a part in gas prices.

“Alabama has a lot of refineries around the gulf,” he said.

“All of the Southeast states benefit from being near the Gulf.”

Ingram says people complain to gas stations about high prices, but in actuality, they share the need for lower gas prices.

Ingram says that the higher gas prices are, the less gas stations sell inside the store, and the snacks and drinks sold inside are the real profit for most stations.

“Most people think that they mark (gas prices) as high as they can, but to be competition in the market they want to be the cheapest,” he added.