You Want How Much a Gallon?
By ALEXEI BARRIONUEVO and JEFF BAILEY
CHICAGO, Sept. 1 - At a downtown Marathon gasoline station here, gas prices did something strange in the wake of the deadly Hurricane Katrina - they fell 25 cents a gallon, to $3.45, for regular unleaded fuel.
The dealer, Jim Klun, dropped his prices Thursday after Marathon Petroleum, the company that supplies his gasoline, admitted through a distributor Wednesday that it had increased prices too much in the confusion that has gripped gasoline suppliers and retailers all over the country since Monday's storm.
Far from the devastation that caused flooding in New Orleans and other cities along the Gulf Coast, Mr. Klun is one of many dealers caught between oil companies and angry consumers.
Motorists often wonder if rapidly rising pump prices are a sign of price gouging. But dealers insist that is not necessarily the case. Typically, they keep only one to three days of supply on hand, and they claim that they have to raise prices to afford the next delivery of higher-price fuel.
Service stations usually add a profit margin of 10 to 25 cents a gallon onto the wholesale price. Of course, the steep pump-price increases in the last week mean that some dealers may be tacking on a much higher profit margin. While there are no price controls, laws in some states do place general limitations on gas price increases.
Dealers say they frequently take the heat for huge price increases, but most are at the mercy of large oil companies that set the price they pay for their wholesale fuel.
Mr. Klun said he consistently priced 20 cents over his wholesale cost. Even with gasoline prices at $2.99 the morning of the hurricane, posting a $3.69 price on Wednesday shook him like never before.
"I've never been close to that," Mr. Klun said Thursday, sitting in the backroom of the gas station his family has run on the edge of the Kennedy Expressway since 1962. On Wednesday, Mr. Klun was notified by his distributor, Parent Petroleum of St. Charles, Ill., that Marathon would be paying him a 26-cents-a-gallon credit for gas he overpaid for.
Across the country dealers posted eye-popping gasoline prices Thursday, reflecting panic in both dealers and consumers not seen since the days after the Sept. 11, 2001, attacks. Some stations on the East Coast and in the Midwest posted prices well over $3 a gallon, putting their prices more in line with those of the West Coast, where prices have traditionally been the highest in recent years. The average price for regular unleaded spiked 6.1 cents, to $2.68 a gallon, from Wednesday to Thursday, according to AAA, the nation's largest motoring organization. Pump prices are 44 percent higher than a year ago, AAA said.
But some dealers posted far crazier prices. Near Atlanta, a BP dealer charged $5.87 a gallon for regular unleaded, later telling reporters and his distributor that he panicked after almost running out a few times.
Scott Dean, a spokesman for BP, said it did not condone the dealer's price. Mr. Dean said the Georgia man was an independent dealer not employed by BP and that he purchases BP gasoline from a third-party distributor. "We did not set the price of that station," Mr. Dean said. In several states, including Alabama and Illinois, attorneys general said they were closely monitoring gasoline prices for signs of gouging.
While some consumers are chronically suspicious of the price-setting of gasoline stations, in normal times gasoline prices are set by a combination of supply of both crude oil and gasoline and the demand for gasoline. The price of crude oil generally accounts for more than half the cost of a gallon of gasoline, with the rest of the cost being taxes, refining cost and distribution and marketing.
But most of those normal rules for how gasoline is priced have been thrown out the window by the hurricane damage, several gasoline market analysts said.
"There is a lot of mass confusion," said Mike Burdette, an economist at the Energy Information Administration, an arm of the Department of Energy. "Everyone is protecting themselves to make sure they can afford the next load."
Mr. Klun is an independent dealer, owning his own station and land. But he gets Marathon gasoline through Parent Petroleum, which delivers gas to more than 200 Chicago area stations, including 70 Marathon outlets. Shocked by the high price he was being charged for his gasoline, he called Parent Petroleum on Wednesday to let officials there know that the Illinois attorney general had inquired about his station's prices. Then early Thursday he was notified by Parent that he would be receiving a 26-cents-a-gallon credit.
"We apologize for all the inconvenience caused," wrote Peter Mancini, president of Parent Petroleum, in a memo.
Mr. Mancini, in an interview, said that on Aug. 30 he got the daily price quotes from Citgo, Mobil and Marathon. Marathon had gone up 45 cents, "like 30 cents higher than anyone else that night."
Mr. Mancini called Marathon to ask what was wrong. After a day of back and forth, the company came back with the rebate. Only eight or nine stations had customers that bought at the highest prices, he said.
"They should be contacting the Marathons of the world," he said, referring to the attorney general's office. "It's sad that the public thinks dealers are the ones making huge money." |
