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Gas prices continue to rise at the pump, no relief in sight

With gasoline prices rapidly approaching last year’s record in Knoxville of $1.74 per gallon recorded last April, motorists don’t have much hope of relief.

“To be honest,” Don Lindsey, of the American Automobile Association, said, “ …We’re looking at a number of different things.

“One of the three big factors is the price of crude, which is going up,” he said in a telephone interview. “What OPEC did, back in February, was cut production and that begins this month. The question then becomes are they really cutting production. OPEC has this history of saying that we’re going to cut production and then they keep on pumping anything they want to pump. The perception among those that buy crude by the tanker load was that they were going to cut production and they were willing to pay and there you go.”

Lindsey added that OPEC member nation Venezuela has also threatened to cut oil shipments to the United States.

Lindsey added that two other reasons for the sharp rise in gasoline prices in the South were attributed to more domestic issues.

“Two more issues that are involved are more domestic,” he said. “One of them is that the oil companies just aren’t keeping much gasoline on hand. They don’t want to spend the money to inventory it, and they just don’t want to keep it. Plus, right now they are having to go through this spring process of changing over to a more environmentally friendly gasoline.”

Lindsey said that the oil companies have to do this to meet Environmental Protection Agency requirements, and those mandates “require an interesting process of flushing out pipeline and other kinds of equipment of the old kind, cleaning those things. At the same time keeping product going to everybody that needs gasoline. It’s a fascinating process. That’s the kind of thing going on.

“So,” he said, “Three big factors: very low inventory; a lot of that based on just oil company choice; plus, the mandatory change over; plus, the price of crude. All of those things play a big factor.”

Lindsey added that “there is the possibility, there’s some little light, that after we move into summertime, a lot of this may ease a bit.”

Up until then consumers are faced with prices that will continue to rise.

“Prices will continue to rise,” he said. “It’s a safe bet up to a certain level. At some point it will level off. It may even happen before we’re through (the EPA) process. It may reach some kind of natural maximum. It wouldn’t be surprising to see it continue to rise through that time period.”

The time period for the EPA mandate is now through June.

Lindsey said that even though the United States only gets about 30 percent of its crude oil from OPEC that the price will continue to rise based on the effect the OPEC cutbacks have on the world.

“Even if we didn’t get it from OPEC,” he said, “the world is so connected that if the world supply of gasoline drops, or a drop is perceived, even if it weren’t a real drop, … a perceived drop, the price would go up based on that perception by speculators and others.”

The price of gasoline by the gallon in Tennessee reflects the inclusion of a 21.4-cents tax levied by the state. The gasoline tax yields $629.7 million a year in revenue. Of that $629.7 million, 7.9 cents, or $232.2 million, goes to cities and counties; .7 cent, or $21.9 million, goes to the state general fund; and 12.8 cents, or $375.6 million, goes to TDOT.

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