Lewd crude

Trying to forecast whether or not gasoline prices in the suburbs will rise or fall this summer is about as predictable as whether or not red or black will turn up on a roulette wheel, gas experts are saying.

The roller coaster ride continues — average retail prices of regular unleaded gasoline in the area spiked at $4.46 per gallon May 14, then fell to $4.25 on May 30, rose to $4.38 by June 2, then plummeted to $3.87 last Friday, according to GasBuddy.com, a website that tracks gasoline prices nationwide.

Over the past year, the price of gasoline has ranged from an average low of $2.90 a gallon to as high as $4.46.

“The reasons for fluctuations can be a little bit of everything,” said Patrick DeHaan, senior petroleum analyst with GasBuddy.com.

DeHaan said Chicago area price fluctuations can be traced back to oil refineries here in the west suburbs.
At refineries in Joliet and Lemont, temporary reductions in the flow of refined gasoline and a reduction in oil supply recently sent prices upward quickly.

“Those brief outages caused a spike in the demand. Currently, the prices in the Chicago area are dropping, but it doesn’t take much to make that change,” DeHaan said June 16. “It really is still all about supply and demand.”

Last week, President Barack Obama announced 30 million barrels of emergency oil reserves would be released, a move expected to result in another drop in gasoline prices at the pump.

Thirty million barrels is the equivalent of about two days’ worth of domestic oil consumption, according to the government.

According to Energy Secretary Steven Chu, dipping into the country’s Strategic Petroleum Preserve was designed to offset a drop in crude oil supply from Libya and other Middle Eastern countries.

But, even though fuel costs were dropping in the Chicago area the week of June 20, the decline likely will never catch up with prices in neighboring states for more than one reason, experts say.

First, Illinois levies the highest gasoline taxes in the midwest, DeHaan said.

“Illinois gasoline taxes are 7 cents higher (per gallon) than Indiana, the nearest competitor,” DeHaan said. “The gap is even more pronounced when compared to Wisconsin (18 cents more) and Missouri (33 cents more).”

“Also, the Chicago area tends to use a more expensive blend of fuel that includes ethanol, so that takes the price up compared to other regions that don’t use that mix,” DeHaan said.

According to Dr. Lawrence Hill, professor of economics and chairman of the Economics Department at Lewis University, the blend of gasoline tends to bring the price of gasoline at the pumps up slightly in the summer.

“In northern Illinois we have stricter compliance standards on how much carbon dioxide vehicles are allowed to emit. So in about April, the gas stations move to the summer blend to reduce emissions, and that can impact the overall supply of gasoline because other blends are taken out of the mix,” Hill said.

And then there are the global factors.

“From our own state taxes and the cost of crude oil being imported into the United States for refining, to local refinery problems and tensions in the Middle East, it all factors into the equation,” Hill said. “The problem is all of these incremental factors add up, and some of them are out of our control.”

Consumers who think gasoline prices in the United States are still primarily controlled by OPEC (Organization of Petroleum Exporting Countries) don’t understand the economics of the world’s oil market, Hill said.

“We actually receive the largest amount of our imported oil from Canada, not OPEC countries,” Hill said.

The general lack of refineries in the Chicago area — Hill said there are five — means a problem at any one could significantly impact the price of gasoline.

“We have relatively few refineries compared to other regions of the country,” he added.

While gasoline prices can be maddening to the general public, OPEC likely will never allow the cost of crude oil to get so out of control to the point that it would encourage the rapid development of a competitive alternative energy source.

“They (OPEC member countries) know that allowing the price of crude oil to rise too high could eventually generate the creation of infrastructure of alternative supplies that could threaten their oil monopoly in the long run,” Hill said. “I think you will always see OPEC keep prices below what it would cost to build up the infrastructure of another source of energy to replace oil.”

Still, while Americans shutter and fear of the $5 mark, those in Europe dream of those days.

Earlier this spring, per-gallon prices neared the $10 mark in Oslo, Norway, at $9.27/gallon, according to Daily Finance, an AOL website. Similar prices were found in Athens, Greece ($8.50/gallon), Stockholm, Sweden ($8.18), and London, England ($8.17).

The opposite is found in many South American countries and Middle East cities. According to Daily Finance, a gallon of gas could be had for 81 cents in Kuwait City, Kuwait, this past March, and just 6 cents in Caracas, Venezuela.

What can we expect in coming months?
“I think prices will continue to drop slightly, especially in the Chicago market, and you may see an average of $3.85 a gallon in the next two or three weeks,” DeHaan said.

DeHaan said his forecast is based on high inventory levels at refineries.

“Right now they are at about a 97-percent capacity, the highest we have seen in a few years. Inventories of gas are up, and I think prices will remain stable until at least late summer or early fall,” DeHaan said.
Stability for the summer, but come September, things could change, DeHaan said.

DeHaan warned that disaster at the pump could be possible late this summer. That’s when the multitude of refineries in the Gulf of Mexico are prone to a disaster themselves — hurricane season.

— Don Grigas, dgrigas@mysuburbanlife.com


 Area businesses feel the gasoline sting
While the frustrations and struggles inflating gas prices are creating among everyday people are both glaring and boundless, the hardships placed on many local businesses — notably small businesses — pack a more powerful punch.

It’s something Hinsdale Transportation Company hasn’t been able to fend off, even though the business has found a way to avoid increasing its limousine service rates.

Melissa Daugher, a secretary at Hinsdale Transportation, said while rising prices may seem like the best way to make up for the rising costs of gas, it’s not so easy.

“Money is tight for everyone,” Daugher said.

Not only do limos use more gas than the average car, limo drivers typically work during rush hour — a time when they often use up the highest amount of gas per mile. And the drivers pay for the gas out of their own pocket.

“I don’t know how they do it,” Daugher said. “(Gas costs) have affected their pay.”

One of Hinsdale Transportation Company’s limo drivers, Jim, who didn’t want to give his last name, said his pay has dropped about 25 percent in recent years.

“It’s not only gas,” he said. “Everything else has gone up — the cost for repairs, oil changes.”

In order to save money, Jim said he’s always looking for the cheapest gas, trying not to let his car idle and limiting use of air conditioning in the summer and heat in the winter.

These factors are forcing other limo drivers to change their habits, too, Daugher said.

Rather than drop someone off at the airport and then drive back to Hinsdale, these days, drivers stick around the airport just in case another person calls.

“They don’t drive around anymore,” Daugher said.

As a taxi driver for 30 years, Jim remembers when gas was $1.25/gallon. Now he pays about $50 every work day for gas.

“Basically, there’s nothing you can do about it,” Jim said.

But Jim, while upset, maintained that it’s worse for others who may not have job at all.

“I’m not getting rich but I’m still able to eat and survive,” he said, adding that he has not considered changing careers.

For others, though, it’s been a different story, he said.

“There’s a lot of people who have dropped out of the business,” he said.

Regardless, Jim said he’s optimistic about the future.

“For every problem there’s a solution,” he said. “You got to try and stay as positive as much as you can in life.”

As contractors, most taxi and limo drivers pay for their own gas, according to Max Abimora, owner of Bolingbrook Taxi.

One of the issues for Bolingbrook Taxi is that the company’s fees to passengers often fall short of the amount of gas that must be purchased to transport the person.

“All (the drivers’) money is going into gas,” Abimora said. “It’s really a big deal.”

As of last week, the company was charging $47 for a ride from Bolingbrook to O’Hare International Airport. Abimora said his taxi-drivers would much rather see that price at $60. However, in a competitive market, Abimora says that’s not an option.

“Customers want to pay the lowest price,” he said, adding that competition in the west suburbs is tough.

Abimora said some of his drivers have quit in recent years to look for other work. He once had 15 drivers; now he is down to under 10.

With no end of high gas prices in sight, Abimora said he has yet to find a way to offset gas costs. He looked into purchasing hybrid vehicles, but that’s not a cost-effective route, he said, because of the high price of hybrids.

“It doesn’t match at all,” he said.

Other businesses — they make up the minority — are actually seeing an increase in sales due to the rising gas costs.

Andrew Almazah, a mechanic at Hartley's Cycle Shoppe in Hinsdale, said his employer has seen an increase in bicycle sales in the last five years. With that has come an increase in needed repair.

“People are bike riding more to save a little more at the pump,” Almazah said, adding that he expects another uptick in business this summer. “I have had customers specifically ask for a bike to use to and from work for commuting.”

Another business capitalizing on fuel costs is the scooter industry.

According to a report from USA Today, scooter sales across the nation jumped 50 percent comparing the first quarter of 2011 with that of 2010.

Dennis Rowley, president of Vespa Downers Grove, confirmed that sales have been robust since the scooter dealer opened last July. Since Jan. 1, the dealer has sold 97 scooters, he said.

“We're selling lots of them our first season ... Saturdays are crazy,” Rowley said. “People are just tired of putting $20 or $40 a day in their gas tank.”

The Downers Grove dealer sells a wide range of scooters from the Vespa and Piaggio manufacturers. They range in price from $3,199 to $6,899, and can net as much as 100 miles per gallon, Rowley said.
Still, while some industries benefit, they remain a strong minority.

And for all the other businesses left in the tank, many end up passing the added costs onto the consumers.

Turnabout Pizza — a family-owned pizza place in Lemont — has been forced to hike its delivery fee to $3 from $2 in recent years, according to one of the restaurant’s delivery drivers.

“Any little bit helps,” Milli Leimetter said, adding that the drivers keep the delivery fee. “We’re doing a lot of driving.”

— Elizabeth Stoever, estoever@mysuburbanlife.com

LOCALS SOUND OFF

Some just deal with it

Donna Suma of Chicago said when she is out in Lemont visiting a friend she fills up to avoid higher gas prices in the city.

“It’s about a 50 cents difference,” Suma said. “It costs me anywhere from $50 to $75 when I put gas in my car.”

Still, she said, the cost of driving hasn’t deterred her travel plans.

“Honestly, I haven’t changed much of anything because of gas prices.”

Rachel Owen, who works as a wedding photographer, has similar thoughts.

“I am just used to paying it now,” said Owen, of Lemont.

She pays about $50 a week for gas. Buying a new fuel-efficient Scion has helped her cause, she said.

“I think it gets about 30 miles to the gallon,” Owen said. “I travel about 350 miles in a week, so I use a tank per week.”

‘I have to travel’

Pat White was filling up her tank at a Meijer gas station last week. She said she feels the brunt of the impact of inflating gas prices because she drives a large SUV.

A hospice nurse in Bolingbrook, White needs the large vehicle for her job.

“I have a lot of stuff to carry around and I need the room,” the Lockport resident said.

She spends about $60 to fill up her tank — and has to spend that amount about three times a week.
“I have to travel a lot around the area to get to work,” White said.

Homer Glen’s Lynn Kabanah just upgraded to an SUV. Last week, she was pumping gas at the Bolingbrook Shell station.

“I just got a bigger car because I have to fill up my grandchildren in it,” Kabanah said, adding that she has 10 grandchildren and a son in Texas she often visits.

Even though everyone always has a seat now, Kabanah wasn’t aware of how much extra it would be costing her.

“I bought it and was unaware of how much it would cost,” Kabanah said. “I guess I just have to adjust to it and adjust the budget for more money spent on gas.”

— By Janice Hoppe