Fuel prices fall back to $1.55

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Gas had jumped 30 cents on Firday

By Lisa King

Many people were dismayed to wake up last Friday and find that gas prices had skyrocketed again.


But on Monday, Friday's 30-cent-a-gallon jump in gas prices -- from $1.45 to $1.75 at some outlets -- had fallen back to about $1.55 per gallon.

Even though the price is back down again, the seesawing up and down was enough to make people nervous.

Marilyn, a clerk at the Shell Station on Taylorsville Road said she never knows when fuel prices are going to go up again.

"They call us and tell us what to change it to," she said. "That's all we know."

What is the determining factor in the rise and fall of fuel prices?

Robert Calmus, media spokesman for Ashland Oil, said, "It all depends on the price of crude."

Fair enough, but what causes the price of crude oil to fluctuate?

Ron Planting, media spokesman for the American Petroleum Institute, said the price of a barrel of crude oil stood at $41.82 at the close of the business day on Thursday. The average price at the pump in Kentucky was $1.45 per gallon.

On Friday, the price of a barrel of crude was up to $44.90 and gas was up to $1.75 a gallon.

"Well, there are 42 gallons in a barrel, so an increase of $3 a barrel would mean about a 10-cent-per gallon increase for each dollar,"  he said.

Planting said crude-oil prices fluctuate daily, even hourly, and several factors affect the price.

The first is supply and demand.

"We import two-thirds of the oil we use in the United States," Planting said. "If there is unrest somewhere in the world and a refinery has to shut down, that decreases the supply, but the demand does not decrease, so the price goes up."

Another big factor, Planting said, is the state of the economy.

"A steady decline in the economy pushes the supply back up, and then gas prices go down," he said. "When the economy declines, less fuel is used. Some reasons are because less delivery trucks are on the road, and people are out of work and not using as much gas going back and forth.

"So historically, as the economy weakens, so do gas prices, and when it gets stronger, gas consumption, and prices, go up."

Planting said individual gas stations set their prices according to what they have to pay for gas. If they have to pay $2 a gallon, for example, they have to charge at least that much. Also, they have to say abreast of the competition, he said. 

"Ninety-five percent of all outlets are individually-owned businesses, and ultimately the prices are set by them and they must meet the competition, just like in any business," he said.

William Hill, manager at Swifty Oil on Midland Trail, said Friday he always keeps track of the prices of other stations in town and always sets his price at the lower end of the scale.

"Every morning, I always check local competitors and see what prices are, and I set the price at whatever the lowest one of them is-or lower," he said. "Thursday, I stayed at $1.45 while everybody else went to $1.59."

Swifty was back down to $1.55 on Monday.

According to the American Petroleum Institute's Web site, the drop in gasoline prices over the past couple of months has been due to a change in supply and demand.

The cost of gasoline is not just comprised of crude-oil prices, however.

Crude oil makes up 72 percent of the price at the pump. Refining the oil into gasoline and retailing adds another 17 percent to the price and taxes account for 11 percent of the price of gasoline.

To compare gas prices locally, go to www.motortrend.com/gas_prices/33/kentucky/shelby