Rising gas prices at home and in Iraq

By GREG EDWARDS / TIMES-DISPATCH STAFF WRITER
Published: April 3, 2008

The average price of regular gasoline set a record high in the Richmond area yesterday, $3.24 per gallon, AAA-MidAtlantic reported.

If a jump of 13.4 cents per gallon to $2.774 in the gas-futures market yesterday is any indication, consumers face more record prices.

Wholesale gas prices tend to follow movement in the futures price on the New York Mercantile Exchange. Gas retailers pay the wholesale price plus transportation and state and federal highway taxes on the fuel, but retailers must determine how much of those costs to pass along to motorists.

Wholesale prices jumped as much as 13 cents a gallon locally yesterday, to a range of $3.28 to $3.36 per gallon, including about 40 cents in taxes and transportation.

However, consumers will see higher pump prices only if that wholesale price increase holds for several days, said Mechanicsville petroleum distributor John Zehler. He added that a 5-cent increase at the pump could be possible by the weekend.

Rising fuel costs and their impact on gas retailers’ business has been a concern, said Mike O’Connor, president of the Virginia Petroleum Convenience and Grocery Association.

Eighty percent of gas is sold to consumers using credit cards, O’Connor said. With credit-card companies charging 3 percent to process sales, or more than 9 cents a gallon on $3.24 gas, retailers are making little profit on their gas sales, he said.

Gas-station profit margins typically range from 10 cents to 20 cents a gallon but can vary widely depending on the market.

O’Connor’s association is working on how to provide consumers discounts for paying for fuel with cash. The problem is that not many people carry $50 to $75.

Yesterday’s 5 percent jump in the price of May gas futures followed a report by the U.S. Energy Information Administration that showed a 4.5 million-barrel drop in U.S. gas supplies during the past week. Gas supplies remain, however, above the five-year average.

Average U.S. gas demand for the four weeks that ended Friday was 9.16 million barrels per day, roughly equivalent to the same period last year. A year ago, regular gas sold in the Richmond area for $2.60 a gallon.

The futures price of crude oil also closed up yesterday on the New York Mercantile Exchange despite a 7.4 million-barrel rise in supplies for the week. Crude-oil stocks are within the upper half of their average range for this time of year, according to the federal agency.

Crude-oil prices are up nearly $40 per barrel from the same period last year. Contact Greg Edwards at (804) 649-6390 or .