Coping with high gas prices – again

By Dennis Seid/NEMS Daily Journal

TUPELO – “Pain at the pump” takes on a whole new meaning for Rick Faucette.
While many drivers gripe about filling up their cars and trucks, Faucette would gladly trade positions.
“It costs about $31,000 to fill one of my trucks,” he said.
Faucette owns Faucette Petroleum and Supply in Tupelo, but that doesn’t give him any special breaks. His company delivers fuel across Northeast Mississippi in 8,700-gallon tanker trucks, which means they’re hugely expensive gas pumps on wheels.
And contrary to popular opinion, petroleum distributors aren’t rolling in cash. The big oil companies – ExxonMobile, Shell, Chevron, etc. – are another story.
But for the middle men, it’s anything but money in the bank.
“Let’s say I delivered fuel last month when it was $3 a gallon,” Faucette said. “I’m still waiting to get paid for that while gas prices have gone up to more than $3.50 a gallon. I’ve got to eat that difference. So I’m scrambling like everybody else trying to figure out how to pay for my gas. Only my bill is a bit higher than most.”
So the more stable gas prices are, the better.
Prices are anything but, however.
A gallon of regular unleaded gasoline cost an average of $3.741 a gallon on Friday, up 46.5 cents from the beginning of the year, according to AAA.
In fact, gas prices have risen 24 consecutive days, and have never been this high at this time of year. Many experts think prices could hit a record $4.25 a gallon by late April.
Everyone scrambling
That has not only consumers scrambling, but also businesses, governments and schools. Fortunately, many have planned ahead.
For example, the city of Tupelo, which fuels dozens of vehicles daily, has prepared for such a scenario. It estimated its fiscal year gasoline expenses at $4 per gallon, and so far has stayed well within its budget.
“We check gas prices every day and book it at the lowest price,” said Tupelo Public Works Director Sid Russell, whose department maintains the city fueling station on Commerce Street.
The department buys gas every two or three days from one of the area’s oil distributors, and the station serves all municipal vehicles.
Each department reimburses Public Works for its own gas consumption. Public Works itself spends about $200,000 per month to fuel its trucks, equipment and machinery, Russell said.
For fiscal year 2012, the city has budgeted $861,700 for fuel.
School districts also are watching gas prices carefully.
Said New Albany School District Superintendent Charles Garrett, “We’ve been lucky. The effect at New Albany has been neutralized because at the same time that gas prices have increased, the cost to heat our buildings has decreased, thanks to the mild winter.”
Ralph Capps, transportation director for Lee County Schools, said this year’s budget is absorbing the higher costs for now. That doesn’t mean he’s not worried.
“Any time you have an increase on fuel prices, it will be an impact on your budget,” he said. But, “we put in the budget last year for an increase so that has helped us out a lot. Next year, when we make the budget, we will look at it and how much we need to budget for.
“When you have an increase like that, it makes you worried,” he added.
Indeed, Lee County Schools Superintendent Jimmy Weeks is keeping a close eye on prices.
“If we are looking at gas and fuel prices at $5 a gallon, it will affect us badly, especially with the budget cuts we are hitting,” he said.
Petroleum distributors like Faucette and Dees Oil President Michale Dees of Ripley say blaming them for the high prices is off-target.
“I understand the frustration,” Dees said.
“But it’s the futures traders who are doing it. Oil is a commodity. There’s not a shortage of product. It’s speculation, along with geopolitical tension with Iran and Israel driving up the price of oil.”
Indeed, gas prices have surged as its primary ingredient, oil, has skyrocketed in recent months. With tensions over Iran’s nuclear program and the country’s threat to cut off the world’s oil supply, crude oil has jumped to around $106 a barrel, up from around $96 a barrel last month.
Gasoline demand has fallen even as supplies have risen, yet prices continue to rise.
That, said Dees and Faucette, goes back to the commodity traders speculating on the price of oil.
“Traders are trying to project the market and that’s driving up prices,” Dees said.
There’s no reason why prices should be as high as they are, both men said.
Dees has been in business since 1972, and he’s been through the Arab oil embargo of the 1970s and a handful of recessions. The run-up in oil and gas prices is unprecedented, he said.
Faucette, too, recalls earlier days when prices didn’t change more than 3 or 4 cents a month. “Today, the prices change daily, sometimes two or three times a day,” he said.
In fact, while he was having lunch Thursday, prices went up 11 cents, then dropped 3 cents within an hour.
The speculators, he said, don’t even take possession of the oil they’re trading. But they’re trying to turn around and make a quick profit, adding to the volatility of oil prices. That trickles down to consumers.
Another issue driving up gas prices is the many different blends for gasoline required across the country.
“There’s a different blend sold in Shelby County than what’s being sold in DeSoto County,” Faucette said. “If we could get a common blend, that would be great. It’s costing time and money to change to all these different blends.”
With warmer weather coming, fuels have to take another blend yet again.
Also adding to the higher prices is the lack of U.S. refining capacity. Having more gasoline available would alleviate some of the price pressures, but a new refinery hasn’t been built in the U.S. since the 1970s.
Dees said two refineries are not operating, threatening supplies if demand suddenly surges. The jump in prices after Hurricane Katrina was caused by the shutdown of Gulf refineries, which provides more than twice the oil refining capacity of any other region in the U.S. Gulf refineries ship more than half of the East Coast’s refined products and more than 20 percent of the Midwest’s.
Any hiccup in production has a ripple effect nationwide.
“If we could get more refineries on line, it would definitely help with prices,” Faucette said. “If we could drill more in the U.S. and get that Keystone Pipeline built, that would help a lot, too. But we know that’s not happening anytime soon.”
Daily Journal reporters Emily Le Coz and Chris Kieffer contributed to this report.
dennis.seid@journalinc.com