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Gaming Guru

Hubble Smith

Labor Day Travel: Fuel Prices High for Holiday

27 August 2003

LAS VEGAS -- Relief from skyrocketing gasoline prices could come as early as next week, after the busy Labor Day weekend travel period, sources in the industry said Tuesday.

"I think it's going to start coming down," said Jerry Kallop, owner of a Chevron station in eastern Las Vegas. "It's pretty much at the top. After the holiday weekend, you're going to see it come back down and average $1.49 by Christmas."

That would be a 45-cent drop from Tuesday's average price of $1.94 a gallon for regular unleaded gasoline in Las Vegas, which is up 6 cents from the previous day and nearly 30 cents from a month ago, according to AAA.

"If it makes you feel any better, Reno is paying $2.11 a gallon," said Sean Comey, spokesman for AAA in Northern California.

By comparison, unleaded gasoline is selling for $2.14 a gallon in Phoenix, $2.12 in Los Angeles and $1.75 in Salt Lake City.

The surge in gasoline prices has been blamed on everything from the recent power outage in the Northeast to a ruptured pipeline in Arizona to the high demand for Labor Day, traditionally the end of the summer travel season.

At least one oil refinery in California is out of commission and a couple are still down in the East following the blackout, Comey said.

"It adds to the uneasiness of the market," he said. "It's a lot like the stock market. They do a lot of speculation about the future and they set prices by trying to guess what's going to happen in the future."

Peter Krueger, lobbyist for the Nevada Petroleum Marketers Association, said the price for gasoline on the spot market has dropped 39 cents this week.

"So that means we've turned the corner on pricing," he said. "I think because of the holiday, we won't see pricing on it come down until next week."

AAA's Comey isn't so sure.

"Don't count on it," he said. "I will say there's no reason for consumers to be optimistic that prices will decline between now and Labor Day."

Prices rise quickly and are slow to come back down, Krueger said, so retailers can recoup profit margins they lost on the way up. He expects prices to begin dropping around the middle of next week and continue dropping a penny or two each day until they settle around $1.76 through September.

"As the winter sets in and demand slackens, I think prices will come down to the mid-$1.60s," Krueger said.

Despite the high prices, AAA is projecting an increase in Labor Day travel from last year, which is good for Las Vegas, a popular drive-in destination for people from Arizona and Southern California.

"I don't have any reason to think that's going to be affected," Krueger said.

Making the 300-mile trip in a vehicle that gets 20 miles to the gallon will cost about $5 more each way than it would have a month ago.

"People look at Las Vegas as a really cool experience and I don't think people are staying home for 10 bucks," he said.

Comey said motorists can save on short-term fuel costs by using regular-grade gasoline instead of premium. Manufacturers may recommend premium for high performance, but it's usually only necessary in vehicles with turbo-charged engines.

Check tire pressure. Every pound of underinflation can result in a 2 percent loss in gasoline mileage. Also, don't carry unnecessary weight in the trunk, especially in cars with smaller engines.

The reopening of the Arizona pipeline Sunday and the end of the blackout means gasoline prices should fall, analyst Trilby Lundberg said. The customary September decline in demand and an influx of imported gasoline also should stabilize prices.

The trouble in Phoenix started when a pipeline that delivers gasoline from El Paso, Texas, ruptured July 30 because of corrosion.

The line is owned and operated by Houston-based Kinder Morgan, the same company that operates the Calnev pipeline supplying Las Vegas. It was reopened Aug. 1 but shut down again on Aug. 8 after safety concerns surfaced.