The party's over?
It appears a 30-cent slide in gasoline prices since the first of the year may have hit bottom this week as prices climbed as much as 13 cents a gallon at several service stations along the Wasatch Front. A sampling of prices in Salt Lake County showed prices increasing an average 5 cents since last week.Recent attempts to stop the drop in pump prices have failed, but industry officials believe, and hope, this week's price increases will take hold.
While motorists may have enjoyed weekly drops in gasoline prices since early January, the slide was worrying service station operators - many of whom were selling gasoline either at or below the cost of buying the fuel from the refinery during the past week.
"You have to be competitive or you will dry up and die," said Paul Ashton, executive director of the Utah Petroleum Retailers Organization, explaining why a business would sell a product below cost.
With demand off during the first quarter, service stations kept lowering the price to keep customers and maintain sales volumes. As the retail price edged closer to the wholesale, some outlets made attempts to raise the pump price, but few followed and the price went down further.
Meanwhile, wholesale prices were moving back up during the past two weeks in anticipation of increased demand for the upcoming travel season.
Although retailers earned some of their highest margins in a decade late last year, many started getting nervous as wholesale fuel cost them 91 cents to 94 cents a gallon early this week and competition kept the pump price as low as 91 cents a gallon.
The state Division of Consumer Protection began receiving more than its usual number of calls from service station operators this past week, accusing competitors of violating the state's Motor Fuels Marketing Act.
According to the law, a service station can't sell fuel below cost unless it is a move to meet a competitor. The statute is designed to prevent large chains from controlling the market by dropping pump prices to drive small independents out of business.
Division director Gary Hansen said the complaints will be investigated and fines possibly levied, although it's next to impossible to find the accused - the first to sell below cost.
"It is a very difficult, elusive game," he said.
Motorists can expect further price increases as service stations recoup the past month's shrinking profits, said Randy Couch, Salt Lake manager for Amoco Oil Co."Like other retail businesses, (service stations) hold down prices in slow demand seasons expecting to make up for it" when demand picks up, he said.
Couch said that even with the recent surge in pump prices, Utah has some of the lowest prices in the country. According to the American Automobile Association's weekly survey, the national average as of last Tuesday was $1.09 a gallon for unleaded regular.