Gas Prices Hit Historic High

February 25, 2013

Mike Fliflet fills up at Valley Service in Valley City. Fliflet buys gas in Valley City because it’s less expensive than in Hannaford, where he lives.

Gas prices in Valley City have gone up nearly 66 cents over the past month, but area gas prices are still among the lowest in North Dakota.

With an average gas price of $3.69 in Valley City, the average gas price in North Dakota, as of Friday, was $3.76 per-gallon –the highest on record – with the highest price in the state in Jamestown at an average of $3.82 per-gallon, according to Gene LaDoucer, AAA spokesperson in Fargo.

“Jamestown usually isn’t among the highest,” said La Doucer. The reason Jamestown prices are higher than Valley City “probably has to do with its market.”

Wes King, owner of Valley Service in Valley City, can’t say why gas prices have risen lately, “but most (customers) know it’s not my fault.”

Many of his customers wonder why, with the richest oil land in the country just to to the west, are North Dakotans paying so much for gas?
King’s business is a full-service station; he still pumps gas and checks his customer’s oil.

“It’s the only station in North Dakota that still does that,” said Mike Fliflet of Hannaford who gets his gas in Valley City because it’s cheapest.

Not only are high gas prices not King’s fault, at times he loses money on the gas he sells. If the price goes up between times when he fills his tanks, he takes a loss on the gas he’s currently pumping. In fact, upon opening a bill from his supplier, King said, “for three or four days last week, I lost about 10 cents a gallon. He wonders if it makes sense to pay someone to pump gas that he’s taking a loss on.

LaDoucer believes gas prices have hit their yearly high because the “futures market has begun to settle down.”

Historically, though, prices usually peak around Memorial Day and begin to decline unless something unforeseen happens.

The gas price at the pump is affected by four things: the price of crude oil, taxes, the cost of refining crude oil into gasoline, and costs associated with getting gasoline from the refinery to the gas station along with marketing. By far, the largest increase in gas prices is due to an increased price for crude oil, according to the U.S. Government Accountability Office.

Crude oil prices, and hence gas prices are driven by supply and demand. In other words, if the demand for gas increases faster than it can be supplied, gas prices will go up, according to the GAO. In 2004, U.S. gas consumption increased by about 56 percent more the the average consumption in 1970 and it continues to increase.

Also on the supply side, natural disasters and other incidents can cause a rise in gas prices. For instance, most U.S. refineries run at about 93 percent capacity, according to the GAO. If a refinery’s ability to operate was compromised by a natural disaster, then the gas supply for an ever-increasing demand would be compromised.

Fliflet hopes the price drops soon, he travels about 250 miles per week. “It’s way too high for average, working class people.” He’s sure it’s the oil companies getting rich, and not King and other gas station owners.

“It’s the oil companies posting record profits, not the people selling gas here,” he said.