Gas prices down from $3 spike Heating fuel costs of greater concern

Motorists in Maine are getting some relief at the pumps as gas prices decline from an unprecedented spike brought on by Hurricane Katrina, but fuel prices remain high and likely will have a continuing impact on the state’s economy, according to a state official.

Beth Nagusky, director of Maine’s Office of Energy Independence and Security, said Wednesday that gas prices in some parts of the state have decreased as much as $1 since prices shot up over $3 a gallon earlier this month.

Still, the approximate average statewide price of $2.95 for a gallon of low-octane gasoline is about $1 higher than it was at this time last year. And a state survey Monday of heating oil dealers in Maine indicated the average statewide price of heating oil had risen nearly $1 since last September to an all-time high of $2.54 a gallon, according to Nagusky.

“We’re not breathing a sigh of relief like this is over,” Nagusky said of high fuel prices. “These prices have worked a real hardship on Maine people. We know we’re in for a difficult winter.”

Unlike gasoline, heating fuel is a “life-or-death” necessity, according to Nagusky. Though gas prices are significant, heating fuel is purchased in larger quantities, she said, giving its cost more of an impact than spending $40 at a time on gasoline.

“Two hundred gallons at $2.50 a gallon is quite an expense,” she said. “If people are putting more [money] into their fuel tanks, they’re going to put less into holiday shopping and travel.”

Pat Moody, spokesman for AAA Northern New England, said gasoline and crude oil prices rose slightly Wednesday because of concerns over Hurricane Ophelia, which was beginning to bear down on the North Carolina coast.

Crude oil futures on the New York Mercantile Exchange rose $1.98 Wednesday to settle at $65.09 a barrel while gasoline rose 4.6 cents to $1.94 a gallon. Heating oil gained 8.5 cents to $1.925 a gallon.

Moody said, however, that AAA expects gas prices to continue to decrease in the coming weeks. Gasoline imports from industrialized nations and an easing of governmental restrictions on fuel are expected to help gas prices decrease further, he said.

Average gas prices in Maine jumped 55 cents a gallon after Katrina slammed into Louisiana and Mississippi with 145 mph winds on Aug. 29, according to Moody. The powerful hurricane damaged or closed oil rigs in the Gulf of Mexico and refineries on the Gulf Coast, cutting off a significant percentage of the United States’ oil production capacity.

The nationwide average for gas price increases caused by the storm was 45 cents, the highest short-term increase ever recorded by AAA, Moody said.

“It won’t go down that 55 cents,” he said of gas price increases in Maine. “Hopefully, we’ll recover most of that.”

According to AAA’s new online Fuel Price Finder, which tracks credit and debit card gas purchases, the average price for a gallon of gas in Bangor late Wednesday afternoon was $2.98. According to mainegasprices.com, the lowest prices in Bangor were just below $2.80 a gallon.

The rate at which gas prices have decreased has been an area of concern for state officials in Maine. On Friday, Maine Attorney General Steven Rowe issued a statement indicating he was “disappointed and upset” that gas prices were declining slowly.

“Prices that jackrabbit up [and] then snail down will be viewed very critically,” Rowe wrote in the statement. “Maine consumers are entitled to see wholesale price decreases reflected in the retail price right away.”

Rowe’s statement elicited a response from the Maine Oil Dealers Association, which in its own prepared release suggested that gas prices perhaps should have shot up even more quickly than they did.

“Whether or not gasoline prices are coming down quickly enough also begs the question whether or not prices went up quickly enough,” the MODA statement indicated. “In this unprecedented situation, where is the benchmark for what prices should or should not be?”

Jamie Py, MODA president, said Wednesday that dealers were put in a difficult situation when fuel costs skyrocketed. Retail prices may have gone up 55 cents, but wholesale prices went up faster and further, he said.

“You saw wholesale prices shoot up 60 to 90 cents in a day or two,” Py said. “[Retail prices] didn’t go up as fast as the wholesale price went up.”

Though dealers were reacting to wholesale prices when retail prices sailed to more than $3 a gallon, the ultimate factor that determines what dealers charge is the prices their competitors are charging, according to Py. Profit margins for gasoline retailers are so tight that most have to have another aspect to their business, such as a convenience store or a carwash, to make a decent living, he said.

“At the end of the day, the competition determines what you can and cannot do, both ways, up and down,” Py said. “I think competition will start driving prices down a little bit more.”