GAS PRICES

Mar 10, 2010 — Grand Forks Herald

James R. Johnson

Mar. 9, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- The Energy Department on Tuesday said it still expects pump prices to climb past $3 per gallon as more motorists hit the road for the spring and summer driving seasons.

While www.northdakotagasprices.com says average retail prices in the state have fallen a nickel per gallon in the past week, AAA Wright Express (NYSE:WXS) and Oil Price Information Service ranks North Dakota in or near the top 10 highest priced states for unleaded and diesel fuel.

Northdakotagasprices.com reported Monday the average price for unleaded in the state is $2.69 a gallon, while AAA quoted state averages of $2.80 for regular, $3 a gallon for premium and $2.988 for diesel. AAA said Monday the average national retail price is $2.75 a gallon, matching the high hit Jan. 14.

AAA lists a gallon of unleaded at an average of $2.75 in Grand Forks and diesel at $3.05, but most stations in the city were listing $2.69 a gallon for unleaded. Fargo stations charge an average of $2.72 for gas and $2.93 for diesel, while Bismarck is quoted at $2.82 and $2.93 respectively.

AAA's highest recorded price for unleaded gas in North Dakota was $4.07 in Bismarck in June 2008, while Grand Forks has the high mark for diesel at $4.67 in July 2008.

Cole Gustafson, a biofuels economist with the North Dakota State University Extension Service, said a reason for fluctuating fuel prices is environmental regulation.

"Since 1990 under the Clean Air Act, the Environmental Protection Agency has required the use of reformulated gasoline blends during April through September in major metropolitan cities," Gustafson said in a press release. "This fuel costs more to produce."

The EPA has estimated the impact to be 2 cents to 4 cents per gallon. Gustafson said that reformulated fuel doesn't offer the same mileage as winter blends, so more has to be purchased, putting more pressure on pump prices.

Economists also found that petroleum companies have more market power during the summer because of the environmental regulation, according to Gustafson. Rather than have a single summertime blend, each major city has a unique formula tailored to address its individual air pollution problem.

"These unique blends make it difficult to ship fuel from surplus to deficit areas, which would moderate price spikes," Gustafson said.

Mike Rud, president of the North Dakota Retailers Association, said the rising price of gas doesn't make sense at a time when inventories in North Dakota are high and demand is down.

"Percentagewise, we're climbing faster than we did two years ago, when gas hit $4 a gallon in some parts of the country," Rud said. "It's frightening to think about gas hitting $3 and $3.50 in North Dakota again this summer when people are still trying to recover from two years ago."

Business analysts note the price of crude oil has soared 18 percent since Feb. 5 as investors seem convinced a growing global economy will boost crude demand. Benchmark crude for April delivery was down 38 cents to $81.49 per barrel in Tuesday afternoon trading on the New York Mercantile Exchange.

The U.S. remains well supplied with gasoline and oil, so there is no prospect of a supply shortage driving up prices. Rud said gas prices are being driven up artificially by Wall Street investors speculating on gas as a commodity.

"It's a guess every time we sit down to analyze it," Rud said.

Tom Kloza, publisher of the Oil Price Information Service, said during the 1990s, a barrel of crude traded from a low of $10.92 to a high of $40.42, a spread of $29.50.

Compare that to the past decaded, when the low was $17.45 and the high was $145.29, a spread of $127.84.

"One only needs to look at these statistics to understand why the price of gasoline has become so volatile and why the market fundamental of supply versus demand no longer exists," Kloza said.

Don Kinslow has been commuting between Detroit Lakes, Minn., and Grand Forks. He said this week that the oil companies seem to be manipulating the price at the pump.

"They've kind of got us over the barrel," Kinslow said. "When I went into the Navy, gas was 26 cents a gallon. I drive an SUV now, but I'm going to go to a smaller, more efficient car."

Vaughn Slover just moved to Grand Forks from Sacramento, Calif. He said gas was more $5 a gallon there at one time, and people were paying it.

"I think the oil companies are just doing it to get paid," Slover said. "They want to push us to nonfuel cars."

Loren Dusterhoft, owner of Demers Interstate Cenex in Grand Forks, said he hopes high prices will be temporary.

"Every time I predict what prices will do, they go the opposite way," Dusterhoft said. "We had a raise last week of 5 cents a gallon. I wish it'd stay around $2.50. People would be happy."

"It'd be nice to get below the $2 mark," said Jake Mikelson, rural Northwood, N.D. "But I'm also realistic."

The Associated Press contributed to this report.

Newstex ID: KRTB-0074-42754253