Huge jump in fuel prices foreseen

Thursday, Feb. 17, 2000 | 11:20 a.m.

Fuel prices that have been steadily rising in Las Vegas will shoot even higher -- as much as 25 cents more per gallon for gasoline -- before this summer, experts say.

The decision of West Coast refineries to cut the production of gasoline will have an "explosive" effect on Las Vegas during the busy summer travel season, when a lack of fuel reserves and a higher demand will drive up prices even more, Tim Hamilton, a petroleum industry consultant, said.

"I predict that gasoline prices in Las Vegas will be 25 cents higher than they are now by April 1," said Hamilton, a longtime critic of major oil companies and a consultant for trade associations, the Federal Trade Commission and others.

A 25-cent rise in gasoline prices in Las Vegas is possible, Bill Robinson, an associate professor of economics at UNLV, said, but more likely it will come at the start of summer, not in just six weeks.

Paul Moreno, spokesman for American Automobile Association Nevada and the California State Automobile Association, agreed that the price of gasoline has not yet topped out.

"The gasoline we are buying now is based on crude oil costing $28 a barrel, while the gasoline we will be buying down the road will be based on crude oil costing $30 a barrel," Moreno said, noting that crude oil is the highest it has been since the end of the Persian Gulf War.

Still, Moreno does not believe there is a reason to panic, especially since the current gasoline prices in Las Vegas, though up an average of a nickel since November, are much lower than last spring, when some West Coast refineries were damaged by fire.

He noted that the average price of unleaded self-serve gasoline in Las Vegas as of Monday was $1.47 a gallon -- five cents higher than last November -- compared with $1.61 per gallon last April.

And the price is still moving upward, Jack Greco, longtime director of the Nevada Gas Retailers Association, said.

"I just got a notice today (Wednesday) from Arco that as of 4 a.m., the cost of gasoline to dealers will be increased by three cents per gallon," Greco said.

Greco said that does not mean he and other station owners will raise their pump prices by that much.

"We retailers initially eat as much of this as possible," Greco said. "Many of us will try to weather the storm and not lose our customers by throwing a big increase on the street."

Las Vegas pump prices already are 8 to 10 cents higher than most places nationwide because of taxes, Greco said. Nevadans pay 52 cents per gallon in taxes, which is about a nickel higher than in California and 15 cents more than in Arizona.

Greco said that in mid-December, for example, his organization found that on average pump prices in Las Vegas were $1.44 per gallon, compared with San Diego at $1.39, Los Angeles and Phoenix each at $1.32, Tampa, Fla., at $1.28 and Atlanta at $1.15.

Experts don't agree on what is causing prices to rise in the relatively mild climate of the West Coast and sunny Las Vegas, as consumers on the frigid East Coast are feeling the rise in fuel prices to heat their homes.

Some economists and industry officials say higher gas prices in the West are a natural result of higher prices for crude oil from Middle East nations combined with U.S. refineries cutting back production of oil, gasoline and diesel products.

Others say West Coast residents are being victimized by greedy Big Oil companies who are taking advantage of gloomy news of East Coast winter heating woes to raise prices at the pump.

"One cent on the price of gasoline translates to $1 billion a year in profit for the oil companies," Greco said.

"This whole issue is simply about refinery profits," said Hamilton, director of the Automotive United Trade Organization in Olympia, Wash.

John Sande, lobbyist for the Western States Petroleum Association, denied that assertion and said gasoline is a "fluctuating market" where a combination of competition and the price of crude oil drives the prices up and down.

"It's supply and demand," he said. "And if you look at the long-term history (of gasoline prices) and compare them with other products, gasoline is a good buy."

Rising fuel prices do not necessarily mean Las Vegas' economy will plummet, UNLV's Robinson said. In fact, they could help the tourist flow from California.

"Since the 1970s availability of gasoline has been far more important than price in Las Vegas," Robinson said. "If tourists from California know they can get to Las Vegas and back by car, an extra $10 to $20 in fuel costs won't stop them from coming here for their vacations.

"If fuel prices are high -- and that will affect air travel as well as cars -- more Californians may come here instead of taking trips back East or elsewhere for their vacations, because it's a shorter trip."

But rising oil costs can hurt Las Vegans beyond the gas pump.

"We don't grow anything in Las Vegas," Robinson said. "Everything we need in Las Vegas starts somewhere else and is brought here on trucks. We live in a trucking world. So higher fuel costs are figured into everything we buy."

Moreno noted that "most everything to do" with the rise in fuel costs since late last year is related to the crude oil situation -- and eventually it will be felt in prices for other consumer goods.

"Higher crude oil prices have pulled retail prices up," Moreno said. "As a result, fuel costs have impacted inflation, which has been stable, relatively speaking. Eventually, that will affect prices for all products."

Greco, who owns a Las Vegas Arco station, said the inflation issue goes much further than that.

"Oil prices can create inflation," he said. "You would be hard-pressed to find an item on the Consumer Price Index that is not affected by the price of oil. A tablespoon of oil is used to make a plastic garbage bag. It's everything everywhere."

Greco said that in addition to the price of groceries going up in Las Vegas, the cost of other items will rise, as trucking firms pay more for diesel fuel. Already diesel at $1.55 is seven cents more per gallon locally than it was in November.

"Trucks deliver building supplies, so you can expect the price of a new house in Las Vegas to be higher because of this," Greco said.

There is little individual consumers can do in the short run but bite the bullet and pay the higher prices.

"People can move closer to where they work, they can replace their antiquated home oil with natural gas, they can better insulate their homes -- it will take a concentrated nationwide effort over a period of years," Robinson said.

"But as long as fuel remains cheap, people won't spend the money for alternatives. In some countries, gasoline costs more than $3 a gallon. We pay some of the lowest fuel prices in the world."