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Relief at the Pump

by Matthew Crowley

Las Vegas Review Journal

NEVADA -- What's that sound at the pump? A little sigh of relief?

Although gasoline prices remain higher than $3 a gallon, statistics from AAA suggest they may be coming down.

The average price for a gallon of self-serve unleaded gasoline in Las Vegas was $3.018 Thursday, down from $3.028 Wednesday, AAA reported in its Daily Fuel Gauge report.

A month ago, the price was $3.167; Las Vegas set a record for gasoline May 17, AAA said, when prices hit $3.176.

"I think people are starting to feel some relief," said Peter Krueger, state executive of the Nevada Petroleum Marketers and Convenience Store Association.

Gasoline prices are also falling statewide and nationwide. The statewide price for a gallon of gasoline was $3.080 Thursday, down from $3.086 Wednesday. A month ago, the average price was $3.206.

The national average was $2.896 Thursday, down from $2.897 a day earlier. A month ago the average was $2.934.

Traditionally, gasoline prices spike with the arrival of Memorial Day and the start of the summer driving season. But AAA Nevada spokesman Michael Geeser said the run-up came early this year, sparked by a change in fuel mixtures.

Methyl tertiary butyl ether, or MTBE, a fuel additive that made fuel burn more cleanly but was linked to groundwater contamination, was phased out. Ethanol, an additive made from plants, was phased in.

Geeser said the switchover artificially inflated fuel prices and helped drive them to last month's record highs.

Geeser said other things helped drive down gasoline prices. For one, he said, crude oil prices fell below $70 and stayed there for a few days. Second, unease over Iran's promise to continue enriching uranium hasn't escalated.

July crude oil rose 36 cents Thursday, closing at $69.50.

Jeff Marshall, the owner of the Trop Stop gasoline station in Las Vegas, said gasoline prices may be lower now, but may change as quickly as the date on the calendar.

"Now we're seeing the wholesale price gasoline move up and down," he said. "But if the ayatollah rolls over in his grave, (oil companies) will find a reason to jack up the prices again."

Krueger warned that gasoline prices haven't been falling for long. A month doesn't make a trend, he said. Also, he said, people's habits likely won't change even if gasoline is a little cheaper.

"The people who have decided they're not going to play this game anymore and are going to buy alt(ernative)-fuel vehicles like a (Toyota) Prius are still going to do that," he said.

Tom Kloza, a senior oil analyst for the Lakewood, N.J.-based Oil Price Information Service, said he expects prices to find a bottom or a launching pad in June's remaining weeks. Although gasoline inventories are fairly comfortable now, Kloza warned there is little margin for error in supply, whether for Western markets or Gulf Coast-fed markets.

Kloza said he expected gasoline prices to drop in the fourth quarter. But he said a second wave of gasoline prices could come in July and August for several reasons.

For one, he said, crude prices remain close to $70. Crude prices have a historical symmetry that suggests markets may see another all-time high, perhaps between July and October, he said.

He added that global unrest in Venezuela, Nigeria and the Middle East could flare up at any time to disrupt markets and send prices spiking.

Also, Kloza said, refiners are running hard to maximize production, and high runs can lead to unit breakdowns.

And, he said, demand remains high.

"Despite all the talk about demand destruction or carpooling, demand is up about 0.6 percent from last year, and may have further lift when we get to the core peak driving months of July and August," Kloza said.

Trop Stop's Marshall said he hopes predictions for higher summer fuel prices don't materialize. Budgets are straining and customers are hurting.

"When the customers come in, we can see the strain etched on their faces. They put $2.52 on the counter and say 'Put it on Pump 1,' " he said. "We know they need money for medicine, for food, to take care of their families. It's been a very difficult time. We do everything we can to help."

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