Companies struggle with high gas prices

Published 12:00 am Sunday, June 11, 2006

By Joseph Marks, staff writer

Bend an ear in the grocery store line and you’ll hear them discussed. Look at any check register in Freeborn County and you’ll see the burden. Gas prices affect everyone who drives, and their effect on a family budget can be enormous. Of all the elements of daily life they have, perhaps, the greatest power to bring national politics into our back yard.

&8220;A lot of people complain the prices are too high,&8221; Jodie Jensen, a cashier at Murphy USA gas station, said. &8220;They say we’re breaking the little guy or they have to quit eating so they can afford gas to go to work.&8221;

For companies that rely on gasoline to stay in business the crunch can be tight.

Jim Lester, part owner of A Quality Cab in Albert Lea, said the amount his company pays for gas has jumped from $700 a month to closer to $900 or $1,000 a month.

So far, Lester said, the company has managed to not raise their regular rate of $5 anywhere in town but they may have to begin charging $6 if prices rise further.

&8220;A lot of seniors ride with us,&8221; he said. &8220;Going from $5 to $6 is a lot of money for our regular customers. We’d like to see prices come down. Then everyone would be happy.&8221;

Allen’s Tow N’ Travel now changes its rates weekly based on a suggested fuel charge rate published by the federal government. Owner Duane Gregory said the company absorbed losses due to rising fuel prices for about eight months but eventually couldn’t bear the burden.

&8220;We had to do it to stay in business,&8221; Gregory said. &8220;It’s affecting everybody.&8221;

Albert Lea residents are doing well compared to those elsewhere in Minnesota and in the country.

The average price for regular gasoline within 10 miles of Albert Lea last Saturday was $2.66, lower than the Minnesota average of $2.73 and lower still than the U.S. average of $2.86. Prices were taken from fuelgaugereport.com and Fuel Price Finder, both search engines run by AAA.

The Minnesota average is down 10 cents from the price one month ago but up significantly from last year’s price of $1.97.

We’re doing worse than our neighbor to the south where gas was selling for $2.70 Saturday.

What really controls gas prices, said Gail Weinholzer, AAA director of public affairs for Minnesota and Iowa, is as simple, and as complicated, as this: futures markets.

Gasoline retailers and speculators on the New York Stock Exchange lock in the price they will sell gasoline at months in advance. Whether the retailer or the speculator profits is determined by whether the price being exchanged rises or falls before the gas actually changes hands, so both sides try hard to anticipate anything that will affect production.

&8220;When oil is traded on the NYSE,&8221; Weinholzer said, &8220;if there’s some fear about supply or a potential shortage, or if there’s concern about a spike in demand, it affects futures markets, and, in turn, what oil is selling for.

&8220;When it gets to the pump, local gas station owners don’t just sell based on what they paid for

it, they sell based on what they’ll need to restock their gas stations.

&8220;Hypothetically, if you buy gas at $2 a gallon and if you think it’s going to cost you $2.50 to replace that gas, you’re likely to charge closer to $2.50 than $2.&8221;

The gasoline futures market has been volatile since the summer of 2004, Weinholzer said, because of instability in oil producing countries in the Middle East and Venezuela and Nigeria.

Erratic weather such as last year’s hurricanes in the Gulf Coast can also cause a spike.

Recent spikes are due primarily to the beginning of the summer travel season, Weinholzer said.

To save fuel costs, Weinholzer recommended keeping automobiles oiled, tuned and maintained.

&8220;Driver behavior has an effect, too,&8221; she said. &8220;Avoid quick starts and stops and avoid rush hour traffic. Try to combine errands instead of making multiple trips.&8221;

(Contact Joseph Marks at joseph.marks@albertleatribune.com or at 379-3435.)