Dollars & Sense

‘Get ready for a roller coaster’ as gas prices swing wildly

Updated: 2013-04-22T12:49:17Z

By STEVE EVERLY

The Kansas City Star

If variety is the spice of life, then gasoline prices this year have been a basket of habanero peppers.

The swings in fuel prices so far in 2013 are the most volatile in at least a decade. The cost of a gallon of gas jumped an average of 50 cents nationwide earlier this year but has since given much of that back. Prices in places such as Kansas City are nearly back to pre-spike levels.

AAA listed the average price of a gallon of unleaded in the metro area on Friday at $3.19 on the Missouri side, and a dime more on the Kansas side, where gasoline taxes are higher.

But more volatility could lie ahead. In fact, St. Louis had another spike in the past week, and by Friday its motorists were paying 27 cents a gallon more than drivers in Kansas City. That spike appears to have been caused in part by supply issues in Chicago rippling out to some other markets.

That big a jump in prices isn’t necessarily ahead for Kansas City — but Steve Mosby, a partner with Admo Energy, which helps fuel retailers buy gas and diesel, said he expects some price increases ahead for the area.

“Get ready for a roller coaster,” he said.

The continuing volatility has complicated summer fuel-price forecasts. The federal Energy Information Administration last week said it expected average prices per gallon to be a few cents lower than last summer.

The forecast calls for fuel prices to be “a bit less than last year but still volatile,” said Sean Hill, an economist for the federal agency.

The current price break comes after two years of record-high oil prices, even when adjusted for inflation, which pushed up gas prices. The price swings in 2013 have again shown the tugs and pulls that go into the prices paid at the pump.

Despite ample oil supplies, fears surface about supply interruptions. That happened in February when there was an attack on an Algerian natural-gas plant, which raised concerns about that country’s oil exports.

But those fears ebbed, and oil supplies remained ample — in part because of growing U.S production. In addition, demand continued to be sluggish as Western economies limped along, and growth even slowed down in emerging Asian nations such as China.

Oil prices since February have dropped $16 a barrel, enough to cause gas prices to fall by 40 cents per gallon. Goldman Sachs, the investment firm, in the past has been blamed for pushing up oil prices through its trades on futures markets. But Goldman recently cut its forecast for oil prices.

“It seems like traders are now focused less on supply interruptions and more on the fundamentals of supply and demand,” said James Williams, an economist for WTRG Economics, which follows energy markets.

A potential conflict with Iran and issues in countries ranging from Libya to Nigeria could once again roil oil prices.

“There’s still potential to have a lot to worry about,” said Williams.

Choke points also continue to exist in the refining and distribution of fuel. The country is speckled with regions, including Kansas City, that use special summer gasoline blends to reduce pollution. Kansas City’s summer gas is supplied by only a handful of refineries, making supplies more vulnerable to shortages and price increases.

“The traditional ups and downs in fuel prices have become more erratic,” said Mike Right, a spokesman for AAA auto club.

And before the recent price break, gasoline was hitting household pocketbooks pretty hard. According to the Energy Information Administration, consumers in 2012 spent 4 percent of their incomes on gasoline. That was the second highest in 30 years, after 2008.

The spike earlier this year cost the average household about $50 a month in additional fuel costs.

And diesel prices are still up, far too high for independent truckers like Lee Klass. He said he was paying an average of $4 per gallon for diesel, or about $7,000 a month, even with a recent decline in the price.

“I’m getting by, but I’m not getting ahead,” he said.

The impact on the overall economy can be harder to decipher, in part because the U.S. is producing more oil.

In addition, the effects of any brief price spike can be hard to determine, although even that can cause consumers to shift money from other things to pay for fuel, said Jason Brown, an economist for the Federal Reserve Bank in Kansas City.

Retailers who sell fuel see that occur whenever prices rise significantly. Casey’s General Store, a convenience chain that has stores on the outskirts of Kansas City, watched as sales declined for prepared foods and merchandise in February and March, when gas prices rose.

“The mood changes when the big signs out front of gas stations show that prices are falling,” said Mike Thornbrugh, a spokesman for QuikTrip, the convenience store chain that is the largest seller of gasoline in the Kansas City area. “People are a lot more friendly when they are down.”

To reach Steve Everly, call 816-234-4455 or send email to severly@kcstar.com.

Deal Saver Subscribe today!

Comments

The Kansas City Star is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Kansas City Star uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here