Archive for Thursday, June 3, 2004

Demand offers little relief from high gas prices

June 3, 2004

Jack Schmidt was preparing Monday for one of his frequent trips to the Flint Hills town of Alma by filling his pickup with gas at De Soto's J-Mart.
With the recent gasoline price increases, the round trip to tend the 1,000-acre spread now costs $50, Schmidt said. There was nothing he could do to cut the cost, he said, pointing to a chemical tank in the pickup's bed that holds 650 pounds of herbicide needed to check the brush threatening his Flint Hills' pastures.
"I have to go there," he said. "I have to do what needs to be done."
Filling her vehicle nearby, Lindie Willhite said gasoline prices of near $2 a gallon had changed the driving habits of her family.
"My husband is taking his motorcycle to work because it gets better mileage," she said. "We plan our outings so that we can get several things instead of just stopping at one place."
Because of gas prices, she and her husband were also taking a wait-and-see attitude about a planned summer vacation to Texas, Willhite said.
Summer vacation options were one of the changes American Automobile Association of Kansas members were considering in light of the record-high gas prices, said Jim Doblins, public information officer for AAA of Kansas.
Despite that finding, there was no indication American motorists were ready to park their cars, pickups and recreation vehicles as summer begins.
"We predict 31 million (motorists) were going on trips of 50 miles or more for the Memorial Day weekend," Doblins said Friday. "None of our members are apparently allowing gas to decide where they are going to go."
That prediction made Doblins leery of motorists' vows to change driving habits.
"It's kind of lip service -- kind of like going on a diet," he said. "I haven't seen any less vehicles on the road because of the price increases."
With demand so high, consumers can expect gas prices to slightly in the coming months and perhaps one minor glitch this week, said Steve Simmons, co-owner of Town And Country Petroleum Marketing Inc., which supplies gasoline to Phillips 66 and Conoco stations and convenience stores in the Kansas City metropolitan area.
Although he said the latest price spike didn't come as a surprise, Simmons said he'd long given up trying to predict the market. Too many factors contributed to the price in the international commodity, he said.
Nonetheless, Simmons said the basic law of supply and demand would indicate consumers should be prepared to continue shelling out $2 per gallon for the immediate future.
"I think OPEC is going to loosen up production," he said. "That will help. But right now that's the only hopeful sign you can look for. Summer driving is here. That increases demand by 10 to 15 percent.
"Every month we have a record month in sales. It (demand) just keeps increasing. You can probably count on it going up a little higher."
Another short-term factor was the federally mandated switch from winter formulated gasoline to a summer formula, Simmons said.
"Right now two terminals are out of summer gas, and dealers are required to have it in the ground June 1," he said Friday.
Simmons said he didn't know what that meant in terms of prices, but he said the mid-May price spike came when the largest convenience store chain in the Kansas City market increased its price when it started selling the more expensive summer-formulated gasoline.
"All the stores followed them," he said. "They have too."
Describing himself as a "lowly distributor," Simmons said neither he nor the retailers he supplied were profiting from the increase in prices.
"Nobody's making money off it accept the big oil companies and the credit card companies," he said. "At three cents a dollar, the credit card companies get six cents for every gallon sold. That's as much as the government."

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