Buying panic drives gas prices higher
Fears over a potential energy shortage from Hurricane Ike has caused a buying panic and forced Gov. Bob Riley to declare a state of emergency to allow price-gouging laws to take effect.
Gas prices in Chilton County rose as much as 40 cents during the day Friday at most gas stations. Those stations that didn’t decide to raise prices saw long lines as residents filled up their tanks, fearing that gas might run out.
Rumors surfaced yesterday that gas prices could go as high as $5 a gallon for gas and that gas shortages could occur, but AAA spokesperson Clay Ingram said those fears are exaggerated. He said some stations might sell gasoline for $5 a gallon, but there will be many gas stations that might sell gas for $1 less per gallon.
“It all depends on how each service station purchases its gasoline supply,” Ingram said.
Ingram said the current fuel situation could be described as a “tight supply,” which was created because 16 gasoline refineries in Texas are being affected by Hurricane Ike. These refineries make up one-fourth of the nation’s gasoline supply, but Ike has forced these factories to be shut down and evacuated.
According to Ingram, the nation’s fuel supply has been reduced to 60 to 80 percent of normal. The decrease in supply has caused the increase in the wholesale price despite the price of crude oil dropping below $100 a barrel yesterday for the first time in five months.
Name-brand gas stations will likely see less drastic increases because their fuel supplies are purchased on a long-term contract in which the price doesn’t change much. Off-brand and surplus gas stations are more likely to see prices in the $5-$5.50 range because they buy wholesale gasoline each day. Wholesale prices yesterday were as much as $4.75 a gallon.
“I’ve never seen this happen before,” Ingram said. “There will be a wide disparity between the name-brand and off-brand gas stations.”
Ingram added that some of the off-brand stations might choose to run out of gas because they don’t want to cause customers to stop buying from them.
“This weekend, we are seeing gas outages from the buying panic, but we will see gas outages in the next few weeks because stations will choose to run out of gas because they can’t compete,” Ingram said.
Alabama’s price gouging law went into effect with the Riley’s declaration of a state of emergency yesterday afternoon.
Attorney General Troy King warned unscrupulous businesses that are seeking to profit illegally at the expense of Alabamians that these practices will not be tolerated.
The state law that prohibits “unconscionable pricing” of items for sale or rent comes into play when the Governor has declared an official state of emergency. An unconscionable price is defined as one that is 25 percent or more than the average price charged in the same area within the last 30 days, unless the increase can be attributed to a reasonable cost. The penalty is a fine of up to $1,000 per violation.