Walla Walla Valley an island of high gas prices

Walla Walla gas prices are still near $4 while the U.S. average heads closer to $3.


Soaring gasoline prices are in the rearview mirror in much of the nation.

For the first time in months, retail gasoline prices have fallen below $3 a gallon in some places, including parts of Michigan, Missouri and Texas. And the relief is likely to spread thanks to a sharp decline in crude-oil prices, experts say.

In Walla Walla, however, consumers continue to pay nearly $4 a gallon for regular gas, and people in the fuel business aren't willing to predict future costs.

"As soon as I did, it'd make a liar out of me," said Jake Brown, owner of Quality Petroleum, a local distributor of gasoline and other petroleum products.

An informal telephone poll this morning found regular gas selling at $3.95 in Walla Walla and Dayton, and $3.83 in Milton-Freewater.

The national average for regular unleaded gasoline is $3.51 per gallon, down from a high of $3.98 in early May. Last week's plunge in oil prices could push the average to $3.25 per gallon by November, analysts say.

In Washington state, the current average for regular gas is hovering at $3.86, up from $3 a year ago, according to the AAA Daily Fuel Gauge Report. The highest recorded average price was $4.32 in July of 2008.

Ben Ward, who has owned Beeline gas station in College Place for 50 years, gave up a long time ago on trying to get a handle on why and when prices fluctuate, he said this morning. "But I do think the general trend is down."

He buys gas for his station on the open market, shopping around to get the best deal, he added.

Differences in state taxes explain much of the gap, notably between Washington and Oregon for area drivers. Milton-Freewater's gas prices typically trail Walla Walla'a by about 10 cents.

"We don't like to see the price of gas increase, for a lot of reasons, said Lenel Parish, who owns Zip Zone Conoco stations in Walla Walla and Milton-Freewater with her husband, Dewey Parish. "It's not profitable for us. When they go up, we try and keep it down by narrowing our (profit) margin. It's a constant struggle. You have to remain competitive, but you also have to pay your bills."

That's the same story in any retail business, Lenel added. "But it hits a nerve when it's on reader boards all over town."

Another factor is that most of the oil used by refineries on the coasts comes from overseas, making it far more expensive than oil piped to refineries in the middle of the country from places such as North Dakota and Canada. The coastal refineries must compete with the growing economies of Asia for shipments of oil.

As well, refineries -- including America's -- sell to the highest bidder, putting supply and demand on a global level, Lenel Parish explained.

Economist Philip Verleger equates the national price drop to "a stimulus program for consumers," leaving them more money for clothes, dinners out and movies. Over a year, a 50 cents-per-gallon drop in gasoline prices would add roughly $70 billion to the U.S. economy.

Arthur De Villar, a 48-year-old safety inspector for the Federal Aviation Administration, paid $2.96 for gasoline near his home in Manchester, Mo., a suburb of St. Louis -- and he recently replaced his SUV with a four-door sedan.

With three boys at home the money De Villar saves on gas goes to the amusement park, a Cardinals baseball game or the movie theater.

"It's far better to be able to put (the money) anywhere other than in the gas tank," he says.

Prices for oil, gasoline and other commodities dove last week along with world stock markets over concerns the global economy is headed for another recession. When economies slow, demand for gasoline, diesel and jet fuel falls as drivers cut back on trips, shippers move fewer goods and vacationers stay closer to home. Oil fell to $79.85 per barrel Friday, a drop of 9 percent for the week. Oil reached a three-year high of $113.93 on April 29.

Economists caution that gasoline savings, while welcome, won't matter much to people if the worst economic fears come to pass.

"Yes it produces some relief, your bill at the gas pump goes down, but it's going down because there are worries that people won't have jobs," says James Hamilton, an economics professor at the University of California, San Diego. "The news has not been good."

And gasoline prices remain historically high. Gasoline has averaged $3.56 this year, the highest yearly average ever. Americans have cut back driving in the face of high prices, but they are likely to spend more on gasoline in 2011 than ever before -- close to $490 billion, according to Tom Kloza, chief oil analyst at the Oil Price Information Service.

Kloza says the latest drop in prices will stick around through most of the fall. And while that may only add $20 a month to a typical commuter's wallet, drivers say it matters.

Sometimes lower wholesale fuel prices doesn't translate to locally, noted Brown, who's been in the local petroleum business for 44 years. "It's possible to see a drop in crude oil prices today and prices at the gas station up a dime."

Pat Wolf, 60, a retired information technology professional from East Lansing, Mich. responded with a "Holy Mackerel!" when he got a text from his wife Friday morning that said a station nearby was selling gas for $2.98 per gallon.

Wolf said prices in the area were $3.49 earlier in the week and he had no hope that they'd fall below $3. "It's one other thing in the back of your mind if you are deciding whether to buy some gizmo or other," he says.

Aureleano Duran, a house painter in Dallas, gave the cashier at a RaceTrac gas station $55 to fill up his red Dodge pickup Friday night, but the tank began to overflow before he shut off the nozzle -- at $49.21. Duran plans to sock away roughly $30 a week in gas savings. "I'm trying not to spend a lot of it," he said. Then he excused himself: "I've got to go get my change."

Gasoline prices have always varied from state to state, but the gap now is especially big. Drivers along the coasts are paying significantly more than drivers in the middle of the country, analysts say. California drivers are paying the highest average price in the lower 48 states, at $3.89 per gallon on Sunday. Missouri drivers are paying the least, $3.21 per gallon, according to AAA, OPIS and Wright Express.

Patrick DeHaan, senior petroleum analyst at GasBuddy.com, says that while he expects the national average to fall to between $3.25 and $3.50 between now and Thanksgiving, some areas could hit $2.50. He says prices in Lansing, Mich., and St. Louis had fallen below $3 already. A price war between filling stations near Bridge City, Texas, pushed prices to $2.62 last week.

"In some of these areas prices are collapsing," DeHaan says.

The trend could reverse, analysts say, if the world economy does not descend into recession. That's because the growth in oil demand from China and other developing nations will more than make up for falling demand in Europe and the United States.

The investment bank Goldman Sachs forecasts that oil will rise to $120 per barrel within the next six months. That's a jump of 50 percent from last week's closing price of just under $80 per barrel.

"Whatever we see gas prices falling to, it won't be the new normal. It will be a launching pad for winter and spring prices," says Kloza, from Oil Price Information Service.


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