Gas-price reason called bogus

Experts say three of the four main reasons listed by the gasoline industry for Utah's retail prices, which are nearly the highest in the nation, seem justifiable. But they say one appears bogus.

The bogus one: Prices stayed high because retail stations are still using up gasoline purchased weeks ago at higher wholesale prices.

The three plausible reasons: Utah's gasoline market is isolated from the rest of the country, so prices rise and fall at a different pace; Utah's economy is hot, so demand is high for gasoline as people can afford to travel more; and supplies were limited recently when three of Utah's five refineries went down at the same time for maintenance.

Those explanations have been given by groups of retailers or wholesalers to the press or state officials probing high prices under orders of Gov. Jon Huntsman Jr. The Deseret Morning News contacted some gasoline pricing experts to see what they think of those arguments.

"The one that doesn't seem to make much sense is that retailers are keeping prices high until they sell off the product that they bought at a high price," says Michael Burdette, a senior analyst for the U.S. Energy Information Administration.

"That argument works only if you are a small mom-and-pop retailer. If you are a big, multi-island retailer, you sell maybe 250,000 gallons a month. There is 8,000 gallons in a truckload, so you sell a truckload a day." So expensive supplies were sold off fairly quickly, and it did not require weeks, he said.

"If you are a mom and pop station, you sell maybe a truckload a week," he said, noting that more expensive supplies still would be sold off fairly quickly.

Salt Lake City wholesalers said this week that their prices have dropped by 35 cents a gallon since Aug. 6, but retail prices have dropped only about 12 cents in that time. Utah prices — averaging $2.85 a gallon on Thursday — are among the highest in the nation. Meanwhile, average prices nationally dropped 46 cents a gallon in the past month.

Alan E. Isaacson, a research analyst for the University of Utah's Bureau of Economic and Business Research, adds that retailers often hike their prices immediately when wholesale prices increase, and do not sell off product they bought at lower prices at low rates. They argue they need to do that to afford buying higher-priced gas later.

"If they don't wait to follow wholesale prices when they are rising, then they shouldn't wait to follow them when they fall," Isaacson said.

Burdette adds, "You have to be consistent. The truth is, gasoline is worth what it is today and it doesn't matter what you bought it for yesterday or may buy it for tomorrow."