Gas prices on rise

Published 12:00 am Wednesday, April 3, 2002

Think your wallet is getting thinner and thinner every time you fill your car's gas tank?

Unfortunately, it's not your imagination. Recently the average price of a gallon of gasoline at state and local service stations has been on the rise.

According to AAA, on the average you will pay $1.36 today and yesterday it would have cost you $1.34, but one month ago it would have been $1.13 in our area.

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All drivers have been watching the price at the pump and are asking the same question: "Why?"

&uot;Every place is going up now,&uot; said Gary Gonczy, director of marketing and advertising for Kwik Trip Stores.

&uot;We are in the process of switching to summer gas.&uot; Gonczy explained stores are changing from the gasses that are formulated for winter temperatures to gasses that are made for warmer conditions.

And there are more drivers during warmer months. &uot;It’s supply and demand,&uot; said Gonczy. &uot;(Prices are) all dictated by the market.&uot;

Daron VanHelden, spokesman for AAA of Minnesota and Iowa added "there's more demand now than there was three or four months ago. After Sept. 11, we saw a drop off in the number of people traveling, but now we're starting to see an upswing."

He said "most local stations will price according to competition, but people make the mistake of looking at the station for the reason for the price changes, when really, they're one of the least critically important reasons. There are transportation costs, market costs, the profits the various middlemen make."

"The end retailer is increasingly finding himself on the shorter end of the stick," VanHelden said. "They're not the ones making out like bandits."

According to a publication from the Energy Information Administration entitled &uot;A Primer on Gasoline Prices,&uot; numerous factors contribute to the final price of a gallon of gas including the cost of crude oil, processing at the refinery, distribution, advertising, marketing costs and additional station costs.

These are all in addition to federal, state and local taxes. In Minnesota state tax is 47 cents per gallon and the state legislature is considering a large gas tax increase.

According to Gonczy, stations in Minnesota are also required to markup gasoline 6 percent over cost and transportation to keep stations from pricing their gas below cost.

&uot;What the consumer doesn’t understand is that the (station’s) profit is the same&uot; whether the price is high or low, said Gonczy.

&uot;Actually (stations) tend to make more money when the price is low,&uot; said Gonczy. He attributes this to consumers buying more gas when prices are lower.

VanHelden said "the trend is that the demand of gas is increasing from year to year," but refineries are not able to meet this demand.

"Last year, we had enough crude oil, but we didn't have enough refineries to process it," so prices rose drastically in the summer, he said.

Part of the problem also can be attributed to different areas of the country requiring different types of fuel for their consumers, he said. Therefore, "you can't just get fuel from place X and bring it here to use," VanHelden explained.

"It would be better if the federal government mandated a baseline for the gas companies," he said. "That way, if we run short here, we can get fuel from anywhere in the country, and the market is better able to absorb glitches that occur."

The process of going from crude oil to gasoline is a long one. First, the crude oil must be shipped from the Middle East to the United States, usually entering in either Houston or New Orleans. Then the oil is shipped to refineries across the country. After this, most gasoline is piped to terminals where it is loaded on trucks for delivery to the individual stations.

All of these processes cost money and VanHelden says "importation is becoming increasingly more expensive. Exploration for places to drill for oil is also more expensive. We have to go to places we never thought we would go to find oil."

Call Lisa M. Sanders at 434-2237 or e-mail her at Call Amanda L. Rohde at 434-2214 or e-mail her at