LITTLE ROCK — The price of a gallon of gasoline has climbed more than 15.5 percent in Arkansas since the beginning of the year, and industry officials say the days of lower prices across the nation are not yet in sight.
At the start of the year, a gallon of gasoline in Arkansas was $3.22. The current average is $3.72, according to AAA’s Daily Fuel Gauge Report. In the past week, the price has increased nearly 9 cents a gallon in Arkansas, and more than 28 cents in the past month.
“Consider yourselves lucky,” said Gregg Laskoski, a senior petroleum analyst with gasbuddy.com, a website that follows that price of gasoline. “Arkansas prices are significantly lower than much of the rest of the country.”
But that’s of little comfort to businesses like Cloverdale Florist in Little Rock.
The higher prices have prompted Cloverdale Florist to raise its delivery charges, said Rita Hall, who has owned the business for 24 years.
She will raise delivery charges from $8 to $8.50 beginning April 1, Hall said, adding that it has been three or four years since she’s raised those prices. She uses an outside business to deliver her flowers in the Little Rock area.
AAA reported Thursday that the average price of gasoline nationwide is at a 10-month high of $3.88 a gallon, up about 6 cents from a week ago and 31 cents from a month ago.
The primary reason for the price increase is the rising cost of crude oil, said Phil Flynn, an analyst with PFG Best, a futures brokerage in Chicago.
On Thursday, the price of oil dropped to its lowest level in a week after receiving reports of a slowdown in Chinese manufacturing. Benchmark U.S. crude fell by $1.92 to end at $105.35 per barrel. It dipped as low as $104.50 earlier in the day, the lowest price since $103.78 on March 15.
Crude oil’s price is staying high mainly because of the threat to supplies in the Middle East, Flynn said.
“We’re consistently over $100 a barrel. We saw a hoarding of supply in Europe because of the concerns over war [in] Iran,” Flynn said. “Those countries are afraid they are not going to get supplies. So if they think they aren’t going to be able to get supplies, they start buying up as much as they can.”
The cost of gasoline may be near its peak in the short term, Flynn said. That is assuming, however, that there is no conflict with Iran.
“If there was a reduction in tension [in the Middle East], we could see prices of oil absolutely collapse,” Flynn said. “In a weird way, we’re riding an Iranian fear bubble.”
Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service, said global demand for crude oil is also helping to push up gasoline prices. Though Europe is stockpiling oil in anticipation of difficulty in getting it in the future, demand for gasoline in the U.S. and Europe is actually down.
By contrast, Asian countries are adding more cars and more factories every day, he said.
Adding to that, refineries in the U.S. are undergoing maintenance as they switch from winter-grade gasoline to summer-grade gasoline.
“Compounding things is refineries on the East Coast are closing down, and others are having problems making the switch,” Laskoski said. “If you take away any region’s refining capacity, that is a void that has to be filled. The void can be filled easily, but at higher costs that are passed on to the consumer.”
Higher costs, coupled with increased global demand and fears that the global supply will be affected by a conflict in the Middle East, have attracted speculators who are betting that the prices will continue to rise.
“All of this brings out speculators and investors and money managers who don’t really have anything to do with the supply-and-demand chain,” Brockwell said.
“There has been a high volume of noncommercial speculative money driving up the price on the futures market.”
The price of gasoline has become a hot-button issue for Republican presidential candidates who blame it on President Barack Obama, even though experts say the president has little control over gasoline prices in the short term.
According to James Sweeney, director of the Precourt Energy Efficiency Center at Stanford University, neither Obama nor any of the Republican candidates can control the driving factors behind oil and gasoline prices.
“What the president can do is help prices in the long term,” Sweeney said.
“If we switch to electric and natural-gas vehicles, and other countries follow suit, oil prices should really come down.”
Also, Sweeney, who said he supports TransCanada’s Keystone XL pipeline, said that pipeline likely wouldn’t lower the price of oil and gasoline in the short term. He said oil from Canada would either go to the Gulf of Mexico refineries or to China, but either way it will be added to the global supply.
Brockwell agreed, saying solutions like the pipeline, more drilling onshore and offshore, and relaxed regulations might lower the prices a little in the short term but it wouldn’t be long-lasting.
“Everyone is looking for a scapegoat and because it’s an election year, people in power get the finger pointed at them, namely Obama,” he said. “If the U.S. government did do something, like opening the strategic petroleum reserve, President Obama would be criticized for interfering with the free market.”
Information for this article was contributed by Chris Kahn of The Associated Press and by David Smith of the Arkansas Democrat-Gazette.
Front Section, Pages 1 on 03/23/2012