Gas price jump expected to be short-lived

BANGOR – Gasoline prices now are among the highest they have ever been in Maine and they should stay that way at least through the upcoming Labor Day weekend.

In the last couple of days, gasoline prices have gone up 5 cents a gallon in what is being called a “residual” price increase. Gas stations that had lower prices than others last week replenished their inventories this week and received invoices that bore the higher prices, according to Michael Shea, president of Webber Energy Fuels.

Last Friday, the price of a gallon of gasoline jumped 10 cents in the biggest one-day price increase in the state’s history. During the week before, the price went up 10 cents through incremental increases.

Before all of that, Mainers already were paying 19 cents more a gallon than last year. As of Thursday, Mainers were shelling out on average 44 cents more a gallon than last year.

The high rates are likely to remain throughout the weekend, according to Shea. Wholesale prices have remained steady the last couple of days and should start going down after the weekend, he added.

“The gasoline issue became a week to 10-day phenomena that’s calming down rather quickly,” Shea said Thursday. “We have not seen any [wholesale] price increases this week.”

The Aug. 14 power blackout, which shut down seven refineries in the United States and Canada, a broken pipeline in Arizona and accidents at two West Coast refineries all contributed to the price jumps. So did uncertainty about the Iraq war and political unrest in Nigeria and Venezuela. Crude prices on the New York Mercantile Exchange reached $32 a barrel, up from $20 months earlier.

In response to the increases, Sen. Susan Collins sent a letter to U.S. Energy Secretary Spencer Abraham asking him to explain why gasoline prices have risen so high, so quickly, and to provide her with the Energy Department’s projection of gas prices in Maine for the next 90 days.

“Going forward, it is important that the cause of this recent sudden increase be ascertained and, if possible, remedied,” wrote Collins.

Over the last 10 days, people wondered whether the price at the pump would top $2 a gallon for regular unleaded. Premium unleaded did exceed that mark.

Drivers were filling up when the prices were low to try to beat the next price increase. And big oil companies, such as Exxon Mobil, Gulf and Shell Oil, thinking that wholesale distributors or gasoline stations would try to hoard the fuel when it was at a lower price, implemented an allocation program, according to Shea.

The big oil companies determined how much fuel wholesalers such as Webber Energy would need on any given day based on a formula that incorporated consumption figures from last year, Shea said. Every day for about 10 days, when Webber would go to “lift” or load its fuel from an oil company’s barges, it would only be given what the oil company decided would be enough for that day.

The allocation program “prevents people form panicking or lifting more than they need,” Shea said. “Overall in the industry they have a fear of people panicking and hoarding the inventory.”

Fortunately, “none of [the allocations] ever lead to outages,” Shea said. “We were working with very low inventories.”

In turn, Webber had to “manage [its supplies] a little bit differently,” he said. That included partially filling up the tanks at gas stations instead of topping them off, he said.

The big oil companies, though, used low consumption figures for the state and the country when they determined the amount of gasoline to allocate, Shea said. Last year was a down year for gasoline consumption, with not as many people traveling because of post-Sept. 11, 2001, concerns about terrorism.

At Webber-supplied stations, consumption this year is up 61/2 percent over last year, Shea said. Nationwide, more than 10 million barrels of crude is consumed daily, up from 9.1 million barrels per day last year, he said.

“Demand is way up from last year,” Shea said.

The allocation program ended Thursday, Shea said, because political and economic concerns prevalent over the last 10 days have subsided and gasoline prices on the New York Mercantile Exchange are starting to drop, according to its Web site.