Tahlequah Daily Press

January 16, 2013

Lower demand means lower fuel costs

By ROB W. ANDERSON
Staff Writer

TAHLEQUAH — Watching the price of gasoline change at the fuel pump can sometimes feel like watching a slot machine spinning in search of the right combination. As soon as a favorable price pops up, it disappears just as quickly as it arrived.

Several factors influence the price of fuel, and customers often pay a price that has been influenced by political opinions, the weather, and even the stock market, said AAA Oklahoma spokesman Chuck Mai, who has worked for the motor club and leisure travel organization for 26 years.

Twenty or 30 years ago, there was a simpler way of monitoring the factors that influenced the price of fuel, but that changed when the Exxon Valdez oil spill disaster in Prince William Sound, Alaska took place on March 24, 1989, Mai said.

“That was really the turning point in factors that influence gasoline prices. Today, there are probably 20 different major elements that go into why the price is what it is on any given day,” said Mai. “Whether Nigerian oil workers are going on strike. Whether there are refinery problems in this country. Are there pipeline problems created by weather in terms of a hurricane? What [the Organization of the Petroleum Exporting Countries] is doing or not doing. Russia plays a role. Venezuela is a major producer. What [President Hugo] Chavez’s opinion of the U.S. is, and whether or not he wants to turn the screws. There are literally 20 to 25 things each day, and maybe not the same things every day. Seasonal demand, yeah, it plays a role, but it’s probably eight or nine down the list of influencing factors.”

A recent AAA Oklahoma press release predicted customers will feel “less pain at the pump in 2013.” As of Jan. 8, the national average price of a gallon of gas was $3.30, while the nationwide average was $3.22 on Dec. 20, 2012. The average price of fuel in Oklahoma was at $2.988 as of Jan. 8, which factored in a 1.3 cent raise in price the day before as a result of prices jumping 8 cents overnight to $2.912 in the Tulsa market. Oklahoma City’s price averages had fallen two-tenths of a cent during that period. The prices change daily and by way of a different recipe of price factors, said Mai.

“[The price is set by a] different formula every day, and a large part of it is the strength of the U.S. economy,” Mai said. “The strength and weakness of the U.S. dollar plays a role. It’s a global economy and everything is tied to everything else. Oil right now is a commodity that is traded on the world market, just like soy beans and corn and gold and any other commodity.”

Tahlequah Phillips 66 store owner Glen Elliott said his Clear Creek store on east Allen Road didn’t turn on profit on fuel sales last year, and customers should feel rest assured he is not gouging prices to produce numbers in the black.

“Literally at this store, I broke even this year. I didn’t make a penny off of fuel,” he said. “I price my fuel to try to break even if someone uses a credit card. My credit card fees are 3 percent, and to mark my fuel up 3 percent is tough to do. If you have enough cash customers, you can make some money on gas, but you have to price it to break even on your credit card fees.”

According to the AAA Oklahoma report, gasoline prices this year are expected to be lower than a year ago because of increased domestic oil production and because customers made fewer trips to the pump. The national average cost of gas should peak at $3.60 to $3.80 per gallon this year, pending no major natural disasters or events take impact the sales of crude oil.

The gasoline Elliott buys for his stores – which include Speedys 66 stores near Welling and Fort Gibson – comes from the Tulsa pipeline, which is fed out of states that border the Gulf of Mexico.

“Now you’ve got the refinery up in Ponca City, but most of my fuel comes from the gulf states, which comes into Tulsa,” he said. “You’ve got the Glenpool pipeline, and there’s the Tulsa pipeline, which comes up out of the gulf states. If a hurricane hit and they have to shut those refineries down, suddenly there’s a shortage of fuel, and the price is going to spike. Unfortunately, the fuel price also goes up and down in the stock market. You can watch the stock market every day, and if you see it shoot up, gas is going up with it.”

Though prices fluctuate, the demand for fuel is down right now, and that has a positive influence on the price, said Mai.

“We’re buying more fuel-efficient vehicles. There is a small increase in the number of alternative fuel vehicles, and I think another major element is the fact that Oklahoma, and Americans really, have learned how to conserve fuel,” Mai said. “People have realized they can, in many cases, cut their fuel bill by how they drive and how well they maintain their vehicles.”