From Deseret News archives:

Utah may choose to put cap on gas prices

Decision expected today on enforcement of law

Published: Monday, Sept. 5, 2005 11:23 p.m. MDT
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"I don't think it needs to go up as much as it does, even if it does need to rise," said Jordan Sommers, who makes almost a dozen trips to fill gas tanks for the auto dealership he works for in Bountiful. When the price moves four cents between trips, "it seems a little bit ridiculous."

The problem for retailers with branded gas is that they actually have no control over the price of their gas. Instead, it is set by the wholesaler, producers like ChevronTexaco or ExxonMobil, responding to global prices, but companies also making record profits.

Blake Sanders, store manager for Slim Olsen's Chevron in Bountiful, said that they typically operate at about an 8-cent to 10-cent margin, but when prices are escalating as quickly as they are right now, it is practically impossible to maintain that margin. Even as he expected the price to break the $3 plateau — it was $2.89 Monday — "we will probably be selling it for what we will buy it."

According to the American Petroleum Institute, crude oil costs are the biggest component shaping the price of a gallon of gasoline, followed by state and federal taxes. Utah's state excise tax is higher than the national average. The actual refiner marketer margin is the smallest component of the price.

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Some options for combatting runaway costs include a cap on gas prices, as was done in Hawaii last week, and a suspension of the state gas tax, a move taken by Georgia Gov. Sonny Perdue on Friday. A state gas-tax suspension also is being considered by political leaders in Massachusetts, Tennessee and Connecticut.

The possibilities of those types of price controls had not even been discussed by Huntsman prior to the holiday weekend, spokeswoman Tammy Kikuchi said.

The state energy office said that there is no evidence of price gouging in Utah, and that while large, the price increases are not unexpected or excessive. In fact, even without Hurricane Katrina, prices probably would have jumped because of the Labor Day weekend.

The price jumps of two or three dollars being seen in the deep South, along the Eastern Seaboard and in much of the Midwest are because of actual shortage related to the loss of refining ability and delivery systems along the Gulf Coast. In Utah, however, shortages are not expected, since 75 percent of the state's crude oil comes from Utah, Colorado, Wyoming and Montana. The remaining 25 percent comes from Alberta, Canada.

But just because Utah receives its oil from outside of the Gulf of Mexico and has its own refining capacity, the state is not immune from national price shocks, according to Lee Peacock, president of the Utah Petroleum Association.

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