What goes down, must come up
After enjoying months of falling gasoline prices, motorists across the commonwealth saw gas priceS rise 10 to 20 cents a gallon this week, with the average price settling at around $2.04.
The rise in the average price, about 4 cents from Wednesday, is still 30 cents less than a month ago and $1.15 less than a year ago. The uptick began nationally Jan. 27, when prices rose for the first time since Sept. 25, ending the longest streak of daily gasoline price declines in retail history.
Tammy Arnette, a public relations specialist with AAA Virginia, said the price increase is a result of a variety of factors, such as seasonal refinery maintenance and a rise in the price of crude oil.
“Price of crude on Monday closed out at $49.57, but it jumped on Wednesday to $53.05, before backing down again to $48.45 Thursday,” Arnette said. “Of course, this is the time of year where we see the seasonal swing because of scheduled refinery maintenance from now until spring.”
Arnette added, “We don’t expect gas prices to be as high during the spring peak this year as they have been in recent years.”
Another reason Arnette cited for the price increase was a strike that broke out at oil refineries in Texas, California and Kentucky on Sunday. Since Jan. 21, the United Steel Workers union was in negotiations with Shell Oil, the company representing the oil industry, about contract issues regarding safety and health benefits.
When those talks stalled, 3,800 workers at nine out of 65 refineries walked off the job, beginning the first major oil strike since 1980.
Arnette said the strike might have jolted the market, causing the price of crude to spike.
“Crude oil definitely has swings, but this swing is likely related to the recent strikes because it scared the market a little bit,” Arnette said.
Lynne Hancock, a public relations specialist with the union, said the strike has only stopped production at one refinery and is an unlikely cause in the price hike.
“The refineries are being run by supervisors and only one was taken down and that was a decision made by the company itself,” Hancock said.
Hancock said the decision to go on strike was a last resort for the union, which is demanding a contract that will hold companies more accountable for understaffed shifts and unsafe working conditions.
“Every day our people put their lives on the line in these refineries and petroleum plants,” Hancock said. “It’s a very dangerous job. It’s not like working in an office or a grocery store. You’re dealing with a lot of toxic chemicals, a lot of chemicals that react with one another and cause explosions.”
Hancock said on paper, shifts are fully staffed at refineries, but many times workers are pulled off and put on temporary assignments, causing employees to work longer shifts, which leads to fatigue, which can cause accidents. Hancock said any hike in price is mostly tied to oil drilling, not from the refinery process.
“Where the oil companies are losing money is in the upstream production, which is exploration and production, so the layoffs happening are people in that segment of the industry,” Hancock said.
Hancock added, “We represent people on the downstream side of production, the refining side, and the refiners have been boosted by the low cost of crude oil, which have enabled them to make good profits.”
The union rejected a sixth deal Thursday evening.
Mike O’Connor, president of the Virginia Petroleum, Convenience and Grocery Association, said for every dollar increase in the price of crude oil, gas rises 2.3 cents a gallon.
“We’ve seen a $5 jump in the price of crude oil, so we’ve seen a correlating rise at the pump. The two are directly related,” O’Connor said. “Nobody in Virginia refines gasoline, there are no oil wells in Virginia, so 95 percent of the price is predetermined before it even comes to the pump.”
O’Connor said because gas stations buy their fuel by the tanker load, lower gas prices mean a better profit margin, which is typically 10 to 15 cents per gallon, depending on the station’s location.
“In the past few months, we’ve seen the pressure in our costs eased, so lower prices all around benefits the entire industry,” O’Connor said.
O’Connor added, “The price really depends on where you are. If you’re in a market on an interstate location where there’s not another gas station within 40 or 50 miles, those prices are going to be higher because there’s no competition. This is a competition-driven business.”
Consumers can “vote with their gas pedals” when it comes to the price of gas, O’Connor said.
“We’re the most transparent industry in the world, because we posted our prices on every street corner in the country, in big bold letters,” O’Connor said.
AAA Mid Atlantic said it does not believe gasoline will break $3 a gallon in 2015.
Here are the following average gas prices for 87 octane in the area as of Thursday:
- Washington, D.C.–$2.41 a gallon
- Maryland–$2.18 a gallon
- West Virginia–$2.26 a gallon
- Virginia–$2.04 a gallon
Contact staff writer Henry Culvyhouse at 540-465-5137 ext. 184, or firstname.lastname@example.org