A new surge in gas prices

May 29, 2008 7:26:02 PM PDT
You've probably noticed a sudden and dramatic rise in gasoline prices: 15 to 20 cents -- just since Memorial Day weekend.

The average price in San Francisco now is $4.20 a gallon. It is $4.17 in San Jose and the national average now stands at t$3.95.

The price of crude oil came down on Thursday, by $4.41 a barrel, to $126.62, as news of a federal investigation into "price manipulation" broke.

In the Outer Sunset, on 42nd and Lawton, gas is at $4.18. People that live around the area say that on Monday, gas was at $4.09. Yet, $4.18 is a "bargain" for regular unleaded gas in San Francisco.

At the Shell station near SFO gas is at $4.45.

Up, up and away go gas prices. And yet the price of a barrel of oil came down $4? So what is the relationship between the price of oil and the price at the pump?

UC Berkeley Energy Expert Dan Kammen says there is a relationship, but it's not a direct one.

"The gas prices you see today reflect something that happened a little bit in the past. They reflect what was the price when that barrel was bought and then refined at the local refinery," said Kammen.

But don't expect Thursday's drop in oil to make a difference down the line.

"A 20-cent increase overnight is due to the gas stations and their supplier, when independent or part of a chain, have decided the market will bear the increase," said Kammen.

And if it hurts to fill a car's gas tank, imagine the pain the airlines are feeling. Jet fuel is up more than 82 percent from last year.

Filling the 60,000 gallon tank of a 747 now costs $240,000.

"The airlines are going to have to start doing more than what they're doing to recoup that cost," said ABC7's Aviation Consultant Ron Wilson.

Wilson says fuel prices are the single biggest problem facing the airlines today. It's behind ongoing cost-cutting moves like charging for checked bags and reducing flights.

They're also raising airfares, so expect to see more of the same.

"The bigger carriers that reap more revenues are not going to have as big a problem as the small ones, and the small ones may well be driven out, as we've seen in the past couple of months we've had five airlines that have filed for chapter 11," said Wilson.

Kammen says the price of oil has in no way peaked, and there's no end in sight.

"People who are buying raw petroleum, raw crude on the market right now see increasing demand in the future, and a US government that's doing nothing to diversify our supply in a significant way, so the forecast is up and up and up," said Kammen.

The oil's market regulator revealed on Thursday that it's had an investigation of the market underway for six months. It doesn't normally just close those investigations, but decided to go ahead and do that because of those exceptional conditions.

We are going to have to wait for details and the results of that investigation.


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