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UPDATE: Gas prices rising, despite steady crude oil costs

Tuesday, February 10, 2009 | 3:23 p.m. CST; updated 3:50 p.m. CST, Tuesday, February 10, 2009

ST. LOUIS — Gas prices are inching up, even as crude oil prices remain steady. So what gives?

Experts on Tuesday said crude oil is just one factor in the price at the pump. The current uptick in price is the result of an increase in refinery costs. And while those who follow the industry don't foresee getting back to $4 per gallon anytime soon, the pump price is expected to increase modestly over the next several months.

The price of a gallon of regular unleaded nationally was at $1.92 on Tuesday, up 13 cents since last month, according to AAA Auto Club's Fuel Gauge Report. In Missouri, the price was $1.79, up 17 cents from a month ago.

Crude oil prices over the same span have generally been around $40 per barrel. In fact, the crude oil price has dropped since Feb. 1 — the price was at $39 Tuesday afternoon.

The culprit, experts say, is refinery costs.

"The refineries are cutting back on production in response to falling demand," said Brian Youngberg, an energy and utilities analyst for St. Louis-based Edward Jones. "That has an impact on price."

Consumer demand for gasoline dropped throughout last year, especially when prices were in the $4 per gallon range in July at a time when crude oil prices reached nearly $150 a barrel. By the end of the year, the price of crude plummeted, and so did the price at the pump.

But with the economy struggling, demand for gas didn't go back up. Youngberg said demand is currently down about 3 percent compared to a year ago.

"We're not sure if things will go back to normal, or if this is the new normal," said Ron Leone, executive director of the Jefferson City-based Missouri Petroleum Marketers & Convenience Store Association.

AAA Auto Club has what it calls a Vehicle Miles Traveled index. Normally, even in down times, people continue to increasingly drive more and more.

But Mike Right of AAA's St. Louis office said there have been 15 straight months of decline in vehicle miles driven, compared to the previous year.

"I've never seen a situation anything like this," Right said.

Youngberg said gasoline prices should stay relatively low as long as the economy struggles. That's because demand will likely remain low until people have more discretionary income to get out and about.

"When the global economy improves, oil demand will pick up," Youngberg said. "Eventually oil prices will go back up, gasoline prices will go back up."

Youngberg projects a long-range forecast of crude oil prices in the $75 to $85 per barrel range. Right cited federal projections that the price of gas will average around $2.30 nationwide for the year.

The good news in Missouri is the state, thanks in part to ready access to supplies and low gasoline taxes, usually ranks among those with the cheapest gas.

AAA's Fuel Gauge Report on Tuesday showed Missouri with the sixth-lowest average price. Wyoming was the lowest at $1.64 for a gallon of regular unleaded, followed by Utah at $1.71.

Among Missouri's five metropolitan areas, Springfield had the cheapest gas at $1.76 for a gallon of regular unleaded, a penny cheaper than St. Louis. St. Joseph was at $1.78, Columbia $1.79 and Kansas City $1.86.

 


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