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Wed, Nov. 13

Prices increased before gas reached Phoenix

PHOENIX (AP) – The high gasoline prices motorists are paying at the pump started increasing long before the fuel even reached Phoenix area retailers.

Most gasoline retailers simply passed on to consumers the added costs they faced. Arizona motorists are now paying the third highest prices in the country to fill their cars' gas tanks.

Government and private sector data shows that between July and Aug. 22, the cost of crude oil rose by 4 cents. But the price gasoline tankers paid at the fuel terminal west of Phoenix jumped dramatically, in some cases by 50 cents a gallon, reported The Arizona Republic.

The largest jump in prices came at the refinery level in Los Angeles, said Mike Burdette of the U.S. Department of Energy. The price of refined fuel rose by 38 cents.

"Some people will say this is price-gouging by refiners, and it's true that they profit," Burdette said. "But when you sell something you own, like a house, you sell it at the price the market will give you. The same thing happens with the refiners."

Gas prices are set through a combination of supply contracts, side deals, discounts, competitive calculation, cost impacts such as refinery and pipeline problems, international turmoil and natural disasters. Costs for everything from crude oil to gasoline at the pump fluctuate daily.

Still, some companies are profiting from the price jumps that motorists are cringing about, said Tim Hamilton, a petroleum industry consultant and consumer advocate.

"Arco, Texaco and so on, those are your winners," he said. "When prices spike, the money goes right out of the Arizona economy and right into a Texas bank account for an oil company. If you don't stop oil companies from manipulating the market and controlling all the volume, then you end up with a real uncompetative price."

Individual oil companies do not talk about pricing and profits.

But accusations of collusion, price fixing or excessive profits that some have made against the oil industry are unfounded, said Anita Mangels, a spokeswoman for the Western States Petroleum Association.

The soaring prices are a response to forces of supply and demand that were thrown into chaos by the break of a fuel pipeline in Tucson and the interruptions caused by the power outage last month, Mangels said.

"It's understandable that people have suspicions and they speculate on who's making the money," she said. "But sometimes it's just plain economics 101. You had a real glitch in supply and your demand has remained growing. The short answer is, costs increased all along the food chain. When you have supply squeezed and demand is so much greater than supply, that's when you see the impact on costs."

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