Fueling up on savings: Gas price trend should continue
Published 1:00 pm Monday, October 20, 2014
With gasoline prices approaching territories they haven’t broached in years, businesses that take their products on the road are finding a little more wiggle room in their budgets.
“It is such a joy to see when the price drops down below $3,” said Brenda Zerby, owner of Moreton’s Flowerland.
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“We are probably one of the last holdouts in that we have tried not to raise our delivery prices, and that is a very big relief and blessing to have the prices coming steadily down instead of steadily rising. It’s the kind of thing that can definitely affect your bottom line.”
The lowest prices for unleaded gasoline in Natchez Friday were at Murphy USA, where $2.91 could buy a gallon.
That’s a far cry from the market’s record-high price of $3.96 in 2008, 24 cents a gallon cheaper than the statewide average a year ago, 20 cents shy of last month’s average price and 11 cents below last week’s price.
Nationally, gasoline prices average 56 cents per gallon cheaper than they were in March.
“We are enjoying some prices we have not seen in many years,” said Mike Right, AAA’s vice-president for public affairs for the Missouri region, which includes Mississippi. “In some areas, it has been almost five years that we have seen some of the prices that we are seeing today.”
That’s because the markets have seen a precipitous decrease in the cost of crude oil in recent months, Right said.
WTI crude oil was trading at approximately $83.20 a barrel Friday, down approximately 20 percent from its yearly high in June.
“Because the price of gasoline is tied directly to the price of oil, we are seeing a similar decrease in the cost of wholesale gasoline,” Right said. “Right now wholesale gasoline is selling for $2.20 a gallon, while back in September it was selling for $2.80 a gallon.”
The drop in prices is attributed to a “worldwide fuel glut,” Right said.
“One of the main factors is the U.S. just surpassed Saudi Arabia in terms of crude oil output,” he said “We have seen a dramatic increase in crude oil output in the U.S. in the last five years, and we haven’t seen a reduction in production coming out of Middle Eastern countries.”
While wholesale prices are constant, most other prices — transportation, markup, taxes and local market competition — are fixed, Right said.
So that means the market factors that lower costs for production can impact prices in ways businesses like Zerby’s will feel it, but one place the fluctuation isn’t being felt at the moment is with the retail gasoline distributors themselves.
“When the prices go up and down, we don’t see a whole lot of difference as far as sale volume goes,” said Ward Graning, co-owner of Go Mart on U.S. 61 South in Natchez.
“We don’t make more money because the price goes up. You have to be competitive with the people around you, and you could be making a few cents more, but you don’t normally make a lot more money because the price goes up.”
Consumers might be more likely to fill up a tank instead of just buying a few gallons at a time when prices are lower, Graning said, but sales volume comes out the same whether sold in bulk or a little a time.
“I’d rather see prices low than high because it helps everybody,” he said.
“It’s one of those things that people just have to buy — when they need gas, they need gas. People have to travel, they have to get to work.”
Right said the current downward trend in gasoline prices should continue for the coming weeks.
“Right now we are still adjusting to some of the reductions in crude oil costs, and we are now in the season where they are using winter-formulated fuel, which is easier and cheaper to produce than what we use in the summer months,” he said. “Traditionally you are going to pay the lowest price during the winter months.”
For the delivery drivers at Gatorz in Vidalia, the decrease in price at the same time as an increase in volume has meant more money in the pockets of employees.
Gatorz has a standard $3 delivery fee to cover the cost of gas for the drivers, owner James Keating said.
“Our deliveries are up, and that fee is just to cover the cost of gas for our drivers,” he said. “However much it takes, the rest of that money kind of counts as a tip for them, so if the price of gas is down it means they’re getting a little more.”