StarBulletin.com

Gas pain


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POSTED: Sunday, March 21, 2010

With increasing crude oil prices, the price at the pump keeps inching upward, just as it did two years ago.

The average price for regular gasoline in the state was $3.48 as of Friday, which is $1.04 more than this time last year. In Honolulu, it was $3.38 a gallon, up from $2.36 at this time last year.

But the recession has made it a different world than the one that nurtured $4-plus gallon prices during summer 2008. For one thing, the economy is more stable, said AAA Hawaii's branch manager Chris Olvera.

“;Gas prices tend to go up when the economy is bad,”; Olvera said. “;We're seeing a more stable economic environment now, so that's why we see a more stable price.”;

In addition, companies that rely on fuel, like electricity utility companies and automobile manufacturers, felt the burn from high crude oil prices in 2008, and have begun to seek alternate sources of energy, said Paul Brewbaker, a local economist and principal for TZ Economics.

“;Even though global demand is rising because of the global economy, where you see economies moving toward expansion, the yang is that we're also moving toward more fuel-efficient vehicle platforms that may dampen demand for petroleum,”; he said.

               

     

 

 

AVERAGE FUEL PRICES

        The average gasoline prices as of Friday, according to the AAA. Prices for 2009 and 2008 are for March 19 of those years.

       

       

                                                                                                                                                                                                                                                                                                                                                                                           
Friday20092008
Hawaii$3.48$2.44$3.63
Honolulu$3.38$2.36$3.53
Nation$2.81$1.93$3.27

       

       

The price of crude oil is about $80 a barrel, much higher than last year's $40-a-barrel prices, but still lower than the back-breaking $140 each barrel went for in 2008. But increasing crude oil prices puts the squeeze on refineries, said Tupper Hull, vice president of strategic communications for the Western States Petroleum Association.

“;Clearly what may be bothersome or irritating for consumers ... is (also) really troublesome for both the refiners and the retailers,”; he said. “;They're getting squeezed by this rising raw material cost, and in most of the U.S., we've seen demand for gasoline and diesel is down quite substantially.”;

Tesoro Corp., who owns one of the two refineries in Hawaii, has acknowledged the squeeze rising prices have placed on its operations. Earlier this month Lynn Westfall, Tesoro's chief economist, said the corporation is re-evaluating all of its refining operations, including Hawaii, to see where cuts can be made.

Tesoro's refinery is an “;independent”; operation, which means it does not own its own crude oil to refine. Higher crude oil prices cuts into the company's profits.

Westfall said two things have changed in recent years that has pushed crude oil prices up. The first is demand from Asia, including growing economies like China and India.

“;In the old days you couldn't have an instance where you had low U.S. demand and high crude prices. U.S. demand drove crude prices,”; Westfall said. “;Now you have the situation where you have high demand in the Far East, and we can't pass those crude price increases along to customers in the U.S.”;

He said crude oil is also being priced on its value as a financial tool, like gold, and less on its usage as fuel. There are more financial players who are buying fuel than there are fuel companies like Tesoro to refine it into product.

“;There was no shortage of crude, yet prices skyrocketed above $140 a barrel as if there was,”; Westfall said. “;It was the financial players who were making a call on the value. Growth in the Far East, one way to participate in that rather than buying Chinese company stock is to buy crude oil because it will move in tandem.”;

Brewbaker agreed. Turbulence in the stock and housing markets during 2008 caused investors to look for commodities that are “;safe havens,”; which included gold and crude oil. Pricing for oil should be stabilized for this year as global economic recovery moves forward. That would mean “;modest”; price increases.

Despite a bitterly cold winter in much of the country that has driven strong demand, abundant supplies have kept a lid on prices.

Oil has traded between about $70 and $85 for months as economic reports waver on the strength of the economic recovery in the United States.

While oil and gasoline prices have been rising, natural gas prices have done the opposite. Prices fell nearly 4 percent Thursday after the Energy Information Administration said natural gas stockpiles shrank less than expected last week.

Prices have dropped more than 30 percent since the beginning of the year. Brewbaker said more alternate energy sources would diminish petroleum prices, and rein in pump prices.

“;That shift toward hybrids and away from trucks, it's a consequence of how the recession reshaped the (automobile) industry,”; he said. “;There would be different sources of capital, and an abrupt change in focus as a means of survival.”;

The Associated Press contributed to this report.