Gas prices increase, Riley declares state of emergency

With gas prices fluctuating throughout the state, Gov. Bob Riley declared a state of emergency on Friday afternoon, meaning the state’s price gouging law is now in effect.

According to a press release from his office, Riley declared the state of emergency after receiving information from the U.S. Department of Energy that hurricane Ike will likely cause fuel shortages.

According to the state law, retailers are prohibited from selling or renting commodities for “unconscionable prices” during declared states of emergency.

Unconscionable prices are defined in the Code of Alabama as those exceeding 25 percent more than the average cost of that product in the last 30 days in the affected area. There is an exception, however, for prices “attributable to reasonable costs incurred in connection with the rental or sale of the commodity.”

The soaring prices, which reached as much as $5 per gallon in some areas of the Wiregrass, are due a rapidly depleting oil supply due to Hurricane Ike’s impending landfall in Texas.

“There’s just a whole lot of refineries that are offline, and that’s what’s impacting the pricing right now,” said Dory Stiles, manager of investor relations for Murphy Oil. “The extent that the pricing is affected will be largely affected by these Gulf Coast refineries that are shut down because of (Hurricane) Gustav and Hurricane Ike, which make up a significant portion of the production capacity for gasoline in the U.S.”

With the decreasing supply, prices have nowhere to go but up.

“Almost 97 percent of the fuel supply for the Gulf Coast is restricted right now,” said Glennie Bench, vice president of finance and administration for Southwest Georgia Oil. “All we can get now is what the terminals already have in their big tanks, and they’re hoping to make it last until this crisis passes. We have been able to purchase some loads of gas, and we’ve tried to distribute that to as many of our stores as needed it.”

According to Bench, distributors are at the whim of their suppliers, who are dealing first-hand with the shortages.

“Some suppliers went up moderate amounts, and some went up extraordinarily high amounts,” Bench said. “Our truck drivers are given the lowest three prices of suppliers, and they are to ask for that fuel first. If that is not available, they go down the list of suppliers until they get something. Since the supply is so restricted right now and many suppliers have very little, if any, fuel at the terminals, our drivers may have had to go far down the list to find suppliers with any available fuel, and that may have been high-priced fuel.”

Some experts believe Wiregrass residents made prices worse by rushing to the pumps on Thursday and Friday.

“It’s the absolute worst thing you can do, without question, far and away,” said Clay Ingram, spokesman for AAA. “There is absolutely no need for it.”
Ingram said supply disruptions created by Hurricane Ike in the Gulf of Mexico would create a “hiccup” in the supply system that would be corrected quickly if not for the run on gasoline created by panic buying.

“The more we buy, the more panic that is going to create,” Ingram said. “That is going to cause prices to go through the roof. With the run on gas, that will cause the supply that much longer to get corrected and keep prices up that much longer.”

Bench agreed.

“I’m sure that (the panic) did make it worse,” she said. “I heard an example of someone pulling up to a store in an SUV, and he had six small containers in the SUV. Not only was he filling up the SUV, but all six containers while cars were lined up behind him. He basically was buying more than what he was going to need in the immediate future.”

Phillip Mixon, an economics professor at Troy University, said panic buying always leads to higher prices.

“There’s a huge spike in demand, and the supply doesn’t change,” Mixon said. “People panic. I did a study of gasoline after Katrina, and I did interviews with gas station owners who said, ’The truck’s going to be here tomorrow. I don’t know why everyone’s freaking out.’ The gas stations wouldn’t have run out of gas if it wasn’t for the panic.”

If residents continue to buy gas in bulk, the problem of price may soon become less relevant to consumers than the problem of availability.

“There’s been some pipelines that are shut down, so it’s a challenging task that our suppliers are working hard to meet,” Stiles said. “Our customers drive demand for our business, so our job is to have our product available, and we’re making every effort to make it available.”

Dothan resident William Fetter filled up at Sam’s Club on Friday afternoon because of a potential supply shortage.

“I drove by another station and saw that they were pretty well filled, so I decided to top off my tank in case there’s a shortage of availability. I’m more worried about availability than price,” Fetter said.

That decreased supply is difficult for some residents to swallow.

“I’m very concerned. I personally don’t believe there’s a shortage like they say there is. I think it’s just gas gouging,” said Dothan resident Elinda Thomas. “It’s almost out of control, and I don’t know what we’re gonna do to get it back. There’s no excuse for the gas to be like this.”

Not so, according to Bench.

“Like I said, it’s not as though there’s new supply being shipped in on the pipeline to be bought. You’re at the mercy of the terminal releasing some fuel from their tanks. They do that at midnight every night, and whenever they release whatever predetermined amount they are restricted to, they close down,” she said. “Our drivers hope they can get enough loads to divide between our stores, but obviously it puts our employees to the point of dealing with hostile customers when it’s not their fault or responsibility.”

One thing residents can do to slow the price escalation is simply to quit buying so much.

“Act like you normally would. If you don’t need gas today, don’t buy gas today. Buy gas when you need to buy gas,” Mixon said.

Efficiency is important during the next several days.

“What we need to be doing is buying as little gas as possible, just enough to get you through the next few days,” Ingram said.

Bench warned that increased spending by residents could put important service vehicles out of commission.

“I would tell (consumers) to only buy as much fuel as they need to take care of their jobs and critical travel, and just wait it out,” Bench said. “If they are able to hold out, they will end up saving money, because prices will come back down at some point. Panic buying will cost them money and leave some critical services, like police cars, at risk. We certainly don’t want those critical service vehicles to be affected.”

Unfortunately, just how long the gas supply will be restricted remains unknown until well after Ike leaves the Gulf of Mexico.

“It will take a little bit of time for things to get back to normal simply due to the logistics of a refinery,” Bench said. “Best-case scenario, which is the storm moves out by Monday and the refineries are okay, they will then have to start their machinery back up on Monday. It takes about 48 hours to get back into production, so we’re looking at Wednesday, then it has to get into the pipeline, to the terminal and then into the stores, so that takes some time. If we’re unfortunate and the refineries take some damage, it could be a matter of days or could be matter of weeks before they’re up and running.”

For residents who travel as part of their jobs, that waiting will be the hardest part.

“I have to be on the road. It’s part of my job,” Thomas said. “I’m already running over 200 dollars a week, so it’s affecting me very much.”