Why did gas prices rise? The latest reasons

PHOTOGRAPHER: Michael Goot

Sandra Sharp of Niskayuna said she was a little shocked when she pulled into the Hess station in Glenville and saw that the price of regular unleaded gas was $4.07 a gallon.

“I think it’s ridiculous, especially since we just read that they were coming down,” she said. “I just wish I knew what the real cause of the rise is. We’d probably be angered.”

Tropical Storm Isaac, a refinery explosion in Venezuela, a switch to a different blend of gasoline and oil speculators are all being blamed for a 14-cent increase in the price of gas during the last week. Gas jumped to an average of $4.07 per gallon in the Albany area, which is up from $3.93 the previous week and $3.81 the previous month, according to the website AlbanyGasPrices.com. The cheapest gas was being sold for $3.89 a gallon at the Albany ShopRite and the most expensive gas was being sold at the Mobil on Route 30 in Amsterdam as of 5 p.m. Thursday, according to the website.

Stewart’s Shops wholesale gasoline costs jumped 30 cents per gallon within the last month, according to spokesman Tom Mailey. That translated into an average 25-cent price increase for consumers.

Mailey said Isaac and the oil refinery explosion in Venezuela, which shut production for a week, occurred at the same time when gas stations are switching from the cleaner summer blend of gasoline to the winter blend.

“Supplies naturally run tight as you try to use up summer gas and move to winter gas,” he said.

Higher gas prices could have an effect on sales but he hasn’t seen it yet. “If you’re spending more at the pump, you have less to spend on what you might normally spend inside of Stewart’s,” he said.

Also any hiccup in the supply chain can raise prices, according to Dennis Kugler, owner of the Sunoco on Erie Boulevard. One of the biggest problems, Kugler said, is the Northeast doesn’t have enough oil refining capacity to meet demand. “Nobody wants a refinery in your backyard. They have prohibited oil companies from building these new mega-refineries that are efficient and can process hundreds of thousands of gallons of crude,” he said.

Kugler also blamed speculators for driving up the price of crude oil to nearly $100 a barrel. Much like the stock market, these investors buy oil futures and then sell at a higher price to make a profit.

“That trading has pushed the price up dramatically in the last 60 days,” he said.

However, Kugler believes the price has peaked and will start to come down once the requirement to use the summertime gasoline ends this week.

“That will lower the cost by about 10 to 15 cents per gallon. We should see a little relief in the next week or so,” he said.

Kevin Berger of Rotterdam said it was unusual to see high prices this time of year because the price usually goes up around the Fourth of July and drops after Labor Day. But that didn’t happen this year. He wondered if there was some political maneuvering at work.

“We’re in an election year,” he said.

American Automobile Association spokesman Eric Stigberg noted that gas prices last peaked at $4.21 per gallon in July 2008.

He also believes this price spike is temporary, although he cautioned that continued unrest in the Middle East could keep prices high.

Stigberg said he doesn’t think high prices will cause people to cancel their fall driving plans. But they may stay closer to home, spend the night at a less expensive hotel or stay with friends and family and eat fast food instead of dining in a restaurant.

People’s daily routines will change, according to Stigberg. They will hunt for the lowest-priced gas stations and consolidate trips.

The increase in gas prices comes at the start of the fall tourist season. However, Mark Dorr, vice president of operations for the New York State Hospitality & Tourism Association, said he didn’t think high gas prices would affect driving patterns.

“We haven’t heard concerns from a lot of our members that gas prices were going to impact fall travel,” he said.

People will still travel and stay in hotels as long as gas prices aren’t “astronomically high,” according to Dorr, but may make a shorter trip.

Long term, Aaron Pacitti, assistant professor of economics at Siena College, believes gas prices will eventually drop as the developing economies in China, India, Russia and Brazil begin to slow their rate of growth.

“The global economy is eventually going to slow down over the next few years. Because of that, you’re going to see lower demand for travel, lower demand for leisure, lower demand for factory orders,” he said.

He also believes that the U.S. won’t see the wild swings in the price of gasoline like it saw in the summer of 2008.

Gabe Zollinger of Ballston Lake said high gas prices were just one more problem facing Americans.

“We’ve been made to cut back an incredible amount,” he said. “Fortunately we’re very resilient, so we’ll do what we have to do.”