The Car and Truck Fleet and Leasing Management Magazine

Gas Costs Hit Record High, More Hikes Seen

March 22, 2005

LOS ANGELES – Nationwide gas prices soared over 12 cents during the past two weeks to reach a record high and an analyst predicted more sticker shock at the pump in the days ahead, according to the Associated Press. Prices should continue to rise in the next few weeks on strong demand and supply problems caused by the transition to cleaner-burning gasoline mixtures as summer approaches, said Trilby Lundberg, who publishes the semimonthly Lundberg Survey of 7,000 gas stations across the country. "There are not any gas price factors that indicate anywhere but up," Lundberg said. The average retail price for all three grades increased 12.74 cents to $2.13 per gallon between March 4 and March 18, according to survey results. The most popular grade – self-serve regular – was priced at $2.10 a gallon, while customers paid $2.20 for mid-grade. Premium averaged $2.29 a gallon for the period That is the largest price hike since the run-up to May 21, 2004, when prices hit a previous record of $2.10, Lundberg said. Prices reflect sharp hikes in the cost of crude oil in recent weeks, Lundberg said. Light, sweet crude for April delivery rose 22 cents on the New York Mercantile Exchange on March 21 in Europe, fetching $56.94 per barrel. That translates into a retail price hike of 20 cents per gallon. "I do not think this is the end of the crude oil price jump," Lundberg said. "Even if crude oil prices don't rise further, it's very likely gasoline prices will continue to rise, at least short term." Seasonal changes in the formula used to produce cleaner gas mixtures and building demand also will contribute to higher prices in the weeks ahead, she said. Diesel now averages $2.24 per gallon, or roughly 36 percent more than a year ago, and at the current pace the entire U.S. trucking industry will spend nearly $15 billion more in 2005, according to the American Trucking Associations. Energy analysts also point out that the United States is much more energy efficient than it was during the global energy shock that followed the Iranian revolution and that oil prices would have to surpass $90 a barrel to match inflation-adjusted high set in 1980. Likewise, gasoline prices would have to climb another $1 per gallon to reach all-time highs. "What we need to do is keep a very close watch on our other expenses ... and hopefully we'll be able to weather the higher fuel prices," said Godfrey LeBron, vice president of Paradise Trailways, a charter bus company based in West Hempstead, N.Y. that has raised its prices to cover the higher cost of diesel fuel. LeBron fears there might come a point where ticket prices rise to a level that begins to sap demand, "but we're not there yet." The package-delivery industry does not appear to be having the same problem. United Parcel Service Inc. of Atlanta initiated its first-ever fuel surcharge for ground deliveries earlier this year and, based on current fuel-price trends, the extra 1.75 percent fee could go up in the months ahead, according to spokesman Norman Black. For air deliveries, the per-delivery surcharge is 9.5 percent, up from 6.5 percent a year ago. Black said things could change if economic growth were to slow, but so far UPS remains comfortable with forecasts that call for U.S. gross domestic product to grow by 3 percent to 4 percent in 2005.
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