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Gas Prices Hit Record on Low Supplies

Posted April 4, 2008
Updated October 18, 2011

— Nationwide and regional retail gas prices surged to new records on Saturday and appear poised to rise further in coming weeks as gasoline supplies tighten.

Oil prices, meanwhile, supported the gas price rally by jumping more than $2 a barrel Friday after a dismal employment report sent the dollar lower.

At the pump, gas prices rose 1.3 cents overnight to a national average of $3.316 a gallon Saturday, according to AAA and the Oil Price Information Service. That price marked the latest in a series of records and was about 60 cents higher than a year ago.

Locally, Raleigh's average gas price went up 1.5 cents overnight to reach a new high of $3.289 on Saturday. Fayetteville prices remained at the record level of $3.285 they on Friday.

The Triad, Asheville and Charlotte also set record highs Saturday, with average prices of $3.266, $3.267 and $3.302 respectively.

Wilmington was the only metro area in the state to not set a record this weekend. It lingered 1.8 cents below its record of $3.306 set March 16.

Diesel prices hung a few cents below $4 across the state and pushed above that marker by 2 cents nationally.

While oil's surge above $100 over the last month has boosted gas prices so far this year, analysts expect gas prices to continue rising regardless of what direction crude takes. The Energy Department expects prices to peak near $3.50 a gallon later in the spring, but many analysts predict the spike could approach $4.

Gasoline supplies are falling, partly because the high cost of crude is prompting producers to cut back on output of the fuel – the more expensive crude is, the more refiners have to pay and the lower their profits are. Producers are also following government mandates to switch over from producing winter grades of gasoline to a less polluting but more expensive grade of fuel for summer.

"That cuts back on some of the supply and helps to pump up the price," said Mike Pina, a spokesman for AAA.

The margin between the price refiners pay for crude and receive for selling the products they make from it is around $11 to $12 a barrel, according to the Oil Price Information Service. That margin has occasionally slipped into negative territory in recent weeks and is well below margins of $37 a barrel refiners earned last spring.

On Thursday, ConocoPhillips said high crude prices were significantly hurting its refining margins. Last week, Valero Energy Corp. cut output at its Corpus Christi, Texas, refinery due to high supplies and falling demand. Analysts believe many other refiners are adopting similar tactics.

Friday's price spike is a sign those cutbacks may be working, giving everyone in the supply chain, from refiners to retailers, the ability to raise prices to try to boost margins. Many gas retailers say they make more on the sale of coffee and sundries in their convenience stores than from selling gasoline.

Of course, that is not good news for consumers also paying higher food prices and watching their home values slide. Food prices are high due in part to diesel prices, which held steady overnight at a national average of $4.023 a gallon, near recent records.

High oil prices are also hurting airlines. Aloha Airlines shut down and ATA Airlines filed for bankruptcy protection in recent weeks, citing high fuel prices as a cause of their failures.

In futures trading, meanwhile, oil futures rose Friday after the Labor Department said employers cut payrolls by 80,000 jobs last month, much more than analysts had expected. The unemployment rate rose to 5.1 percent.

That news sent the dollar lower and pushed light, sweet crude for May delivery up $2.40 to settle at $106.23 a barrel on the New York Mercantile Exchange. Gasoline futures for May delivery rose 3.24 cents to settle at $2.7567 a gallon.

Gasoline futures were also boosted Friday by a fire that shut down part of a Los Angeles refinery.

Much of crude's price moves in recent months have been tied to the dollar. Many investors view crude, gold and other hard commodities as hedges against a falling dollar and rising prices. Also, crude becomes less expensive for overseas investors when the dollar is falling.

In other Nymex trading Friday, May heating oil futures rose 6.93 cents to settle at $2.9921 a gallon, while May natural gas futures fell 9.5 cents to settle at $9.322 per 1,000 cubic feet.

In London, May Brent crude futures rose $2.38 to settle at $104.90 a barrel on the ICE Futures exchange.

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Associated Press Writer George Jahn in Vienna contributed to this report.

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  • shep8851 Apr 7, 2008

    Gas prices up? Low supplies?? can anyone say " manipulation of production which controls prices"? Oil industry is producing at 78% of capacity--and has been for the last 3 years. And we wonder why gas prices are so high? Look who controls production and the supply available...