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R.I. gas prices at $4-a-gallon threshold

09:00 AM EDT on Thursday, May 29, 2008

By Timothy C. Barmann

Journal Staff Writer

Gasoline prices in Rhode Island continued to surge higher this week, and now are at the cusp of crossing the $4-a-gallon mark.

The average price of self-serve regular gasoline was $3.989 a gallon, breaking the record high set only last week.

Yesterday’s price was up 13 cents from last week, and up 95 cents from one year ago.

The average price is computed by the state’s Office of Energy Resources, based on a survey of local stations.

The range of prices found by the survey was unusually narrow. The highest price was $3.999, while the lowest price was $3.959, a difference of only 4 cents. Frequently, the state’s survey finds gasoline prices vary much more significantly between stations, often in the range of 20 cents to 25 cents.

A similar survey by AAA Southern New England found an average price of $3.969 a gallon, with a high of $4.059 and a low of $3.899. That was a range of 16 cents.

Gasoline prices frequently rise in the spring as refiners make the switch to summer-grade gasoline, which emits less pollution than winter-grade gasoline.

But the dramatic price increases over the past several months is mainly due to the rising price of crude oil rather than to this annual switchover, according to the Energy Information Administration, an agency that’s part of the U.S. Department of Energy.

For example, the spot price of West Texas Intermediate crude oil rose steadily from $101.54 per barrel on March 31 to a record-high of $128.93 per barrel on May 20. That translates into an increase of about 65 cents per gallon. The cost of crude oil currently accounts for more than 70 percent of the price of gasoline, the EIA said.

Another factor that typically pushes up prices this time of year is a rise in demand for gasoline as the annual summer vacation period begins. But gasoline consumption is down.

The AAA predicted earlier this month that 1 percent fewer automobiles would travel at least 50 miles during the Memorial Day holiday, compared with last year’s holiday weekend.

“Softer demand this spring has already had a dampening effect on gasoline prices, which would be higher than they currently are if year-on-year demand growth was near long-term norms,” the EIA said in its latest This Week in Petroleum report, published on May 21.

The agency said that next month, consumers can expect higher gasoline prices, if crude oil prices continue to rise.

Yesterday, crude oil for July delivery fell $3.34, or 2.5 percent, to settle at $128.85 a barrel at 2:53 p.m. on the New York Mercantile Exchange. It was the biggest one-day drop since April 29, Bloomberg news reported. Prices have doubled over the past year.

tbarmann@projo.com

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