As Arkansas’ economic fortunes show steady improvements, consumers shouldn’t expect to get a reprieve at the pump through the summer and remainder of 2012, experts say.
According to the U.S. Energy Information Administration, gasoline and diesel prices in Arkansas and across the U.S. have risen for the fourth straight week. That trend, unfortunately, will probably continue throughout 2012 and the near-term future for Arkansas motorists.
“Expect higher prices,” AAA spokesman Mike Right said of Arkansas retail gas prices. “There is quite a bit of anxiety in the market right now and there won’t be any relief anytime soon.”
For the week ending Feb. 20, the U.S. average retail price of regular gasoline increased almost 7 cents to $3.59 per gallon, about 40 cents per gallon higher than last year at this time. Prices were up across all regions, with the largest increase coming on the West Coast due to a large 20-cent-per-gallon increase in California.
PRICES HEADED HIGHER
Pump prices in Arkansas for regular unleaded are posted at $3.48 per gallon, 11 cents below the national average, according to AAA. GasBuddy.com, a real-time gas price website for consumers, shows retail prices ranging from a low of $3.23 per gallon at several gas stations in Northwest Arkansas to a high of $3.69 at a Citgo location in downtown Batesville.
Despite the disparity in prices across the state, there is a consensus among experts that Arkansas pump prices will likely top $4 a gallon during the traditional U.S. summer driving season – beginning Memorial Day weekend and ending on Labor Day. Other forecasters have the price topping out as high as $5 and $6 per gallon in other states.
On the low end of the scale, the EIA said it expects regular‐grade motor gasoline retail prices to average $3.55 per gallon in 2012, only two pennies higher than a year ago. The U.S. Energy Department statistics agency, however, has hedged its bet recently saying that prices could average about 7 cents per gallon higher than the annual average during the all-important peak driving season.
“Recent options and futures price data imply that the market believes that there is about a one-in-four chance that the U.S. average pump price of regular gasoline could exceed $4 in June of this year,” the EIA said in its short-term forecast on Feb. 7.
Still, Gregg Laskoski, senior petroleum analyst at GasBuddy, calls the government’s forecast “a little conservative.” He predicts pump prices for the remainder of 2012 will average between $3.75 and $4.25 for a gallon of regular unleaded nationally. Arkansas retail prices will be slightly lower than the national average, he said.
Right, AAA’s public affairs representative for Arkansas, Missouri, Mississippi, Louisiana, southern Illinois, and eastern Kansas, also said the EIA’s projections are out of date
“We are already 40 percent to 50 percent higher than their (short-term) projections,” he said. “Those (estimates) were based on conditions that are just not present now.”
Laskoski did offer Arkansas drivers a small bit of good news, saying the state will not see the drastic price spikes that larger urban and coastal areas see.
“Arkansas is in much a much better position that other areas of the country,” Laskoski said, citing the state’s access to low-cost crude oil through interstate pipelines and nearby refineries. “A lot of people in other parts of the country would love to be in your shoes.”
However, that good news is largely offset by that fact that current retail prices are 35 to 50 cents than a year ago, depending on where you buy your gas and what brand you put in your tank.
Overall, pump prices in Arkansas’ metropolitan areas range from a low of $3.40 per gallon in the Fayetteville-Springdale-Rogers area to a high of Springdale-area to a high of $3.50 per gallon in the Texarkana area, according to AAA’s daily fuel gauge.
Motorists in the Fort Smith area are seeing prices at $3.45 per gallon, while travelers and residents in the Little Rock-North Little Rock area and Pine Bluff are paying an average of $3.48 and $3.49 and a gallon to fill up their tanks, respectively.
Motorist choosing to fill up the tanks with a higher-grade of gasoline are paying a premium of $3.75 a gallon across the state. Big rig drivers and other diesel fuel users are paying more than $3.88 a gallon, up 38 cents from a year ago.
PRICE DEBATE, CRUDE PRICES
The ongoing debate on what to do about rising gas prices continues to rage on. In a conference call with reporters earlier this week, John Felmy of the American Petroleum Institute said the U.S. must develop more of its own oil and natural gas and allow more oil imports from energy-rich Canada to increase America’s energy security and help address higher gasoline prices.
“By far, the single biggest factor in today’s higher gasoline prices is the rising cost of crude oil. It has driven virtually all the rise in gasoline prices,” said Felmy, an economist for the oil industry trade group.
According to the EIA, the price of West Texas Intermediate (WTI) crude oil (light sweet crude) will average about $100 per barrel in 2012, almost $6 per barrel higher than the average price last year. However, the market believes there is about a one-in-fifteen chance that the average WTI price in June 2012 will exceed $125 per barrel, the EIA said, and about a one-in-fifty chance that it would exceed $140 per barrel.
On Friday (Feb. 24), light, sweet crude (domestic) for April delivery was trading at $108.64 on the New York Mercantile Exchange, up 81 cents. In London, April Brent (international) crude rose 54 cents to $124.16 a barrel.
AAA spokesman Right said improving worldwide economic conditions and the Iran crisis will continue to exert upward pressure on prices. At the same time, when economies strengthen overseas, the U.S. dollar weakens and the price of oil becomes relatively less expensive.
These are also causing a growing gap between the nation’s premium light sweet crude and the more expensive Brent crude overseas. That spread can also be seen in the price of gasoline at the pump in the U.S., Right said.
Today, areas in the center of the country that use gasoline from refineries with access to the relatively cheaper crude products have seen prices hold steady or even move lower in recent weeks, while areas having to rely on refiners using more expensive products have seen prices move higher, the AAA said.
In Arkansas, the spread has pushed up Arkansas pump prices nearly 15 cents in recent weeks, the AAA said. Right added that with record pump prices already posted in January and February of this year, Arkansas will probably easily eclipse the state’s highest average price for regular unleaded later this summer. That record price of $3.97 per gallon for regular unleaded was reached on July 17, 2008.
“This could be a tough year for (Arkansas) consumers at the pump,” he said