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No Comments [ Add Comment ]Drivers' lament
By Jeff DeMossPrices for other goods will likely join fuel's climb
Pete Drosner just hit a milestone he would rather have avoided.
For the first time, the Layton resident paid more than $100 to fill up his Dodge Ram truck with diesel.
"Unbelievable," he said of the triple-digit bill glaring on the pump display at a station in Ogden last week. "If this keeps up, I'll have to get another job."
Drivers in the Top of Utah are feeling picked on as they continue to pay record-high prices for gasoline, but the real cost of the price increases goes well beyond what they see on the marquees at local fueling stations.
Sharp increases in fuel prices don't just hurt individual drivers at the pump -- they indirectly drive up prices for everything from industrial equipment to doughnuts as the cost to produce and transport goods rises. Local schools and governments are forced to adapt as increased costs eat into their budgets, raising the likelihood of tax increases.
The pressures are eventually passed on to taxpayers and consumers, who represent the end link in the chain of commerce. But when consumers have to allocate more of their budgets toward fuel, it leaves less for them to spend elsewhere, and that has a negative impact on the business community at large.
"It's really a double-edged sword for us," said Dan Vaughan, owner of Stimson's Inc., which operates two gas stations and a grocery store that sells gas in the Ogden area. "We're selling gas below our cost on the street and being accused of gouging customers. Meanwhile, our customers have less to spend in our stores."
Thousands of consumer products ranging from baby shampoo to car tires are made with petroleum or petroleum derivatives, and higher oil costs translate into higher price tags for those products.
Major retailers like Wal-Mart Stores Inc. and Target Corp. are also citing gas prices as a major reason for recent sales slumps.
Renee Martin, a nurse practitioner in Ogden, said prices are eating into her family's fixed budget. She has been cutting back on unnecessary driving and impulse shopping in an attempt to ward off the specter of unprecedented pump prices.
"We have mortgage payments, car payments, and three kids to raise," Martin said. "After that, there's not much left, so something's got to give."
Sustained high fuel prices are also affecting the budgets of local governments and schools. Brian Hansen, transportation director for the Davis School District, said schools may have to cut back on field trips and athletics-related trips if the high prices persist.
Districts set per-mile reimbursement rates for their transportation departments. The 228 school buses in the Davis district currently receive $1.75 per mile from the district, but Hansen said that will have to be raised to $2 or more for the upcoming year.
"As the prices go up, the state funding we receive doesn't go as far as it used to," he said. "Because we will have to charge more to do trips for the school, the money the district allows for field trips will get used up faster."
School buses typically get about seven miles per gallon of diesel fuel. While buses are certainly more efficient than individuals driving their kids to school, the hundreds of buses that operate in the Top of Utah every day still place significant demand on local fuel supplies.
Ogden Fleet and Facilities Manager Richard Brookins, who oversees the city's 650-vehicle fleet, said the city anticipated higher fuel costs when it prepared its annual budget.
"Right at the moment, we're OK," Brookins said. "If it goes any higher, it will be a problem."
Still, with the increased fuel prices, the city's fixed budget means less money for other areas.
"It always hurts because the money could be used for something else," Brookins said.
Christine Sorenson, manager of the Cutrubus auto dealerships in Layton, said the prices have yet to make an impact on overall sales or the types of vehicles people are buying.
"We're on track to sell as many new vehicles as we did in 2006," Sorenson said. "If gas prices continue to rise, maybe things will be different by July or August, but our business has not changed as a whole at this point."
She said Dodge trucks are still the hottest sellers for Cutrubus in Layton, although some customers opt for diesel engines now that diesel fuel is cheaper than gas in the area. It's also more fuel efficient.
Three years ago, $2 per gallon was practically unheard of in Utah. Today, that would be a sweet relief to local motorists.
Local gas prices have been hitting record highs on a daily basis since May 1, and were at an average of $3.12 per gallon for regular unleaded in the Ogden-Salt Lake City area Friday, according to AAA.
AAA spokeswoman Rolayne Fairclough said the recent price trend is troubling, especially since no major natural disasters are behind the spike in prices, as was the case when Hurricane Katrina affected refining operations on the Gulf Coast in 2005.
The nationwide record high of $3.06 per gallon recorded in the days following Katrina still stands today, but current prices are quickly approaching that level.
Add the fact that oil prices are about $10 per barrel lower than a year ago, and the industry has only one major explanation left for the record-high prices.
"Demand is outpacing supply," Fairclough said.
Utah has five oil refineries with a total refining capacity of about 164,000, 40-gallon barrels of fuel per day. Those refineries produce mostly gasoline, but they also make diesel, jet fuel and other products.
Utah's refineries, while significant to the local economy, are a drop in the bucket on the national level.
U.S. refineries delivered more than 9 million barrels a day to the domestic market in March, and the nation imported more than 13 million barrels of crude oil and other petroleum products during the month, according to the American Petroleum Institute.
Meanwhile, officials say isolated incidents in and around Utah may cause temporary price spikes. A May 6 fire at the Silver Eagle refinery in Woods Cross could result in higher diesel prices, said Lee Peacock, president of the Utah Petroleum Association.
Peacock said at least two Utah refineries have been interrupted in recent months for significant repairs.
Gas and diesel prices are expected to keep rising in the run-up to Memorial Day, but Drosner said that won't stop him from a planned trip to Lake Powell for the holiday.
"I'm going fishing," he said. "I don't care if it's $4 a gallon."
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