Gas prices on the rise as refineries switch to summer blends early

2/15/2013

By ANGIE HAFLICH

By ANGIE HAFLICH

ahaflich@gctelegram.com    

Average gas prices in Garden City and surrounding areas have increased by about 30 cents in the last month and by an additional 8 cents in the last week. The same is true for the rest of the state, resulting in a state average that is uncharacteristically hovering near the national average, which is usually higher.

According to the AAA’s website, discover.aaa.com, the average price for a gallon of unleaded gas in Garden City was $3.50 per gallon, as of Thursday afternoon, a jump of .083 cents per gallon since last week and a jump of 31 cents per gallon since one month ago.

According to the AAA website, the average in Dodge City was $3.526, Liberal was $3.502, Scott City was $3.516 and Syracuse was at $3.604 per gallon.

The statewide average, according to AAA’s website is $3.551, which is just under the national average of $3.628.

“We had kind of a glut, if you will, with inventories, probably in the refineries in our area, compared to other parts of the country,” James Hanni, AAA executive vice president of public affairs, said. “So when everybody shut down and started working on this thing, it was just more pronounced and the spikes were pretty good size — 10, 15 cents or more at a time, as they moved up. And now we’re much closer to the national average. We’re almost right there.”

The shutdown that Hanni was referring to is the point at which refineries begin the process of switching over from winter to summer blends of fuel.

“It’s the ‘R’ word, refineries. I think basically what’s been going on is, normally about this time of year, in the past, you see refineries begin the process of switching over from winter to summer blends of fuel and those fuels are more expensive, they have more additives in them, so they’re more expensive to refine, and then of course, the whole issue of when you switch over, it closes the refinery, which means they’re closed for a couple of weeks — I’m not sure that it’s completely closed, but there’s definitely some retooling time that goes into that process,” Hanni said.

Hanni said that this changeover to summer blends is a little earlier in the year than normal, but he didn’t know why that was the case.

“I haven’t heard an answer and I haven’t had anybody explain why,” he said. “For one reason or another, it started sooner and these spikes in prices are due to that and it’s just sooner and more pronounced, but I guess if there is any good news in that ... we still think that the average price of gasoline, nationally, is going to be a little bit lower than it was last year. The national average is expected to peak at $3.60 to $3.80 per gallon this year and that compares to 3.90 for a gallon in 2012.”

Despite the recent spikes in gas prices locally, Kansas’ gas prices are typically at the low end of the spectrum, compared to other parts of the country.

“Usually, Kansas is below the national average, as well it should be because the ones on the top side of the national average are states like Hawaii, California, New York — they’re a long way away from refineries and that’s where all the people are - the demand’s greater and all that,” Hanni said.

Thursday, the states with the highest average gas prices were New York, California, Alaska, Connecticut, D.C., Hawaii. Maine, Maryland, Michigan, Rhode Island and Vermont, where prices ranged from $3.774 to $4.259 per gallon, according to AAA’s website. The states with the lowest average gas prices were Montana, New Mexico and Wyoming, where prices ranged from $3.111 to $3.424 per gallon.

Patrick Lingg, controller at Jones Oil Company Inc., located in Stockton, said that a number of factors come into play that typically make Kansas’ average gas prices lower than the east and west coast states, including refining costs, such as tarrif fees, pipeline fees and transportation fees, but that the main reason for the disparity is tax rates.

According to the Kansas Department of Revenue, the state gas tax rate is 24 cents per gallon.

State tax rates are then combined with federal tax rates, which according to gaspricewatch.com is 18.4 cpg for gasoline, putting the overall tax portion of a gallon of gas in Kansas at 42.40 cents per gallon.

Lingg said that the fuel tax is 64 cents per gallon in Connecticut, 61 cents per gallon in Michigan and 69 cents per gallon in both California and New York.

“People don’t realize how much tax is on a gallon of gas, or on a gallon of diesel and wherever you are in the United States, everyone pays the same amount of federal tax, but the state tax rates vary from state to state,” Lingg said. “So in Kansas, we may enjoy more of a conservative rate for fuel tax than California, New York, Connecticut or some other states do.”

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