Demand for gas is dropping, taking prices with it

In any given day in the United States, drivers pump 369 million gallons of gasoline into their vehicles, according to the U.S. Energy Information Administration. If cars could travel in space, and get 20 miles per gallon, that would be enough to travel to the moon and back — more than 15,000 times.

A lot goes into the price of a gallon of gasoline, right down to how much fuel consumers are buying versus how much is being produced. Yet, the reason why gas typically gets more expensive the further inland one gets is actually much more simple: How expensive it is to transport the fuel there. (Michael Hinman/Staff Photo)

A lot goes into the price of a gallon of gasoline, right down to how much fuel consumers are buying versus how much is being produced. Yet, the reason why gas typically gets more expensive the further inland one gets is actually much more simple: How expensive it is to transport the fuel there.
(Michael Hinman/Staff Photo)

Since 1990, the price of gas has skyrocketed 184 percent, from a national average of $1.24, to today’s $3.52, according to federal data. Yet, consumption remains brisk, even if actual volume is down. That’s thanks to better fuel efficiency, and the advent of hybrids and electric cars.

Labor Day is a busy weekend for gas stations as many families choose to travel by car to small vacation spots away from home. Typically, that kind of demand would push prices higher. But this year might be a little different, AAA spokesman Mark Jenkins says.

“The demand is higher, and you’ll see prices inch up a little bit,” he said. “And if it does, you won’t have to wait long for it to fall right back where it was before.”

Still, gas prices this weekend are expected to be the lowest in four years, and Jenkins believes a gallon of gas could fall below the $3 mark for the first time since the end of 2010.

That might be perfect timing for Pasco County commissioners, who will spend September debating on whether they should increase local gas taxes by a nickel to help pay for much-needed new roads in the county. Their biggest concern is having that extra tax passed on to the customer. But it might be hard to notice in a county where the difference in gas price from one side to the other is nearly 25 cents per gallon.

On Sunday, New Port Richey had one station offering fuel for $3.01, and many others well below $3.10, according to GasBuddy.com. However, by the time a driver reaches Wesley Chapel, the best she might find is $3.14 at a Sam’s Club.

And forget Zephyrhills. The cheapest there was $3.25 at a Marathon station just outside of Wesley Chapel.

Why? It’s all about logistics, Jenkins said.

“There are a lot of variables that goes into how much gas costs, but one of them is quite simply their distance from supply,” he said. “Gas is usually tankered in from the ports, and the further they have to go, the more it might cost in the end.”

If most of central Florida’s fuel is shipped into Tampa’s ports, then places like Lakeland and even Orlando should be sky-high when it comes to gas prices. But it’s not, Jenkins said, because underground pipes sends thousands of gallons of fuel each day across the state from Tampa’s ports directly into the area’s home of Mickey Mouse.

“You also have to consider retail competition,” he said. “If you’re in an area where there are fewer gas stations, your prices are going to be a little higher because there is less competition.”

Looking beyond the pump
Gas is big business nearly anywhere there are cars and roads, but stations themselves aren’t really making a killing when it comes to profits. The U.S. Department of Energy estimates that for every dollar spent in gas, 13 cents go to taxes, 8 cents to distribution and marketing, 14 cents to refining, and 65 cents goes straight back to the companies that supply the gas in the first place.

The typical gas station may tack on a few pennies more for its own profit, but it usually has the smallest impact. Instead, these stations make their money by getting people inside their convenience stores, earning a much higher profit margin from drinks, snacks and tobacco products than they could ever see at the pump.

Wawa, the Pennsylvania-based chain that has opened dozens of locations in the Tampa Bay area over the past year, uses fresh food to get drivers through its doors. One of the longtime area brands it competes with is Atlanta-based RaceTrac, which might not offer made-to-order subs, but is not shy about helping its customers wake up in the morning. The stores offer an expanded coffee bar with six flavors, as well as prepackaged sandwiches and salads, company spokeswoman Ashleigh Collins said.

Collins wouldn’t say how much importance RaceTrac puts on attracting customers inside the store from the pumps, but touts the fact it’s a “one-stop shop” for customers who want to fuel up, stock up, or both.

“For the most part, gas stations are using gas as a conduit to get you inside their convenience stores,” Jenkins said. “Whatever they are offering in their store, that is basically their lifeline. And for the most part, the gasoline they offer is just a means of getting consumers into the door.”

Gas prices have been dropping for nearly two months, but the market’s bottom is quickly approaching, Jenkins said. In just a few weeks, refineries will start switching from its summer blend, and the changeover will wreak enough market havoc to kick up prices.

“We could see prices jump in September, and continue that way through the rest of the fall,” he said. “But this hasn’t really been the typical year, and I wouldn’t be surprised to see a lot more happy people at the pump by the end of the year because of where prices might end up.”

Florida’s price at the pump:
Sept. 2003 – $1.74
April 2004 – $1.85
Jan. 2005 – $1.92
Oct. 2006 – $2.39
Feb. 2007 – $2.24
Nov. 2008 – $2.47
May 2009 – $2.13
April 2010 – $2.88
Sept. 2011 – $3.66
July 2012 – $3.26
March 2013 – $3.88
Aug. 2014 – $3.49
Source: U.S. Energy Information Administration

Published August 27, 2014

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