Hurricane Gustav may bring end to decline in gas prices

Wednesday, August 27, 2008 | 3:38 p.m. CDT

ST. LOUIS — Gasoline prices are down significantly across Missouri, but that trend may soon come to an end.

AAA Auto Club's latest fuel price index on Wednesday indicated Missouri has the nation's lowest gasoline price with an average of $3.42 for a gallon of regular unleaded. Some Missouri cities are even lower, including St. Louis, with an average price of $3.31.

That's nearly 70 cents per gallon cheaper than the record gas prices reached in mid-July. AAA's Mike Right cites the decline in crude oil and wholesale gasoline prices as the reason.

In mid-July, when gasoline prices peaked at around $4 per gallon in most areas of Missouri and even higher around the country, wholesale gasoline was $3.52 per gallon. By Aug. 18, wholesale gas costs had dropped to $2.83.

But Right said prices may be going up again. Wholesale gas prices have risen 25 cents per gallon in the last week, reaching $3.08 by midday Wednesday.

Even more concerning is Hurricane Gustav, which is threatening the Gulf Coast, raising worries it could damage refineries. Forecasts suggested it could reach the U.S. as a dangerous Category 3 hurricane next week. The tentative forecast track pointed toward Louisiana, but experts said it might hit anywhere from south Texas to the Florida panhandle if it continues to develop.

Global oil prices rose by $1.40 early Wednesday to above $117 a barrel on concerns the storm could disrupt output in the Gulf of Mexico, home to a quarter of U.S. crude production.

"If indeed it's a repeat of Katrina and Rita, we're in for some troubling times," Right said.

Diesel fuel prices have declined sharply, too, in the past six weeks, though they remain much higher than gasoline prices. The statewide diesel fuel average on Wednesday was $4.03 per gallon, down from $4.55 a month ago but still significantly higher than the $2.85 it sold for a year ago. Nationally, the average price of a gallon of diesel was $4.28, down from $4.74 in July.

Right said new federal regulations changed the formulation of diesel fuel, making it more expensive to produce. While refining costs make up 3 percent of the cost of a gallon of gasoline, they now make up 16 percent of the cost of a gallon of diesel fuel, he said.

While gasoline prices are down sharply from July, they're still 76 cents per gallon higher than they were a year ago, on average, in Missouri, and 92 cents per gallon higher nationally. AAA predicts a 1 percent decline in travel over the Labor Day weekend, based on the result of a national survey.

The AAA survey shows the biggest loser will be the airlines - air travel is expected to drop 4.5 percent. But travel by train and bus is expected to rise 12.5 percent.


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