Horizon, Host: Ted Simons

April 7, 2008


Host: Ted Simons

Gas Prices


  • Linda Gorman of Arizona AAA talks about the reason for high gas prices in the state and the near-future forecast.
Guests:
  • Michelle Donati - AAA, Arizona
Category: Business/Economy

View Transcript
Ted Simons:
Good evening and welcome to "Horizon." I'm Ted Simons. One of the reasons being cited for higher gas prices is that gas refiners are cutting back on production. When demand is so high, why would it be cut? Reportedly due to high prices. Prices are expected to keep rising as summer nears. Here to explain the situation in Arizona is Michelle Donati from triple-A Arizona. Good to have you on the program.

Michelle Donati:
Thank you for having me.

Ted Simons:
Lets talk about numbers where are they at?

Michelle Donati:
Right now the nation averages $3.45 a gallon, and Arizona is about nine cents less than that, about $3.25. We're paying about 38 cents more than this time last year.

Ted Simons:
how come? What's going on here?

Michelle Donati:
A couple of things, crude oil is the leading story and has been for quite some time. It is currently trading above $100 per barrel. It closed today at $109. In 2002, it was at $20 per barrel, and in 2006 at $60 a barrel. Now you can see why it influences price, especially now.

Ted Simons:
What about refinery problems? I know last year that was a major topic of conversation.

Michelle Donati:
We haven't seen a lot of refinery problems, although we are in refinery maintenance season. Now, this usually makes prices go up a little bit for a couple of reasons. Number one, tighter supplies. And number two, refineries are more prone to mechanical problems and failures when they're making a switch and performing maintenance and such.

Ted Simons:
The price right now, as high as it is, really can't be blamed for anything other than, what, competition on the market?

Michelle Donati:
The market is driving prices right now. Crude is a safe haven for investors, especially with the economy so weak, a weak dollar, and the housing market going down. More investors are purchasing crude oil, driving up the price of crude and the cost of gasoline.

Ted Simons:
Not too encouraging for a forecast, is it?

Michelle Donati:
No, it's not. We are looking at record prices, especially with summer driving season right around the corner. Demand has remained pretty dismal, especially in states like california, that are experiencing much higher prices that we are right now. In order to make prices go down, we would have to see that continue, and that's really unknown at this point.

Ted Simons:
Demand is going down because of the prices?

Michelle Donati:
Because of the high price, exactly.

Ted Simons:
Should then -- you're saying we can't really formulate that into lower prices as yet?

Michelle Donati:
Not yet. Refineries are operating in the lower percent range, and it could be because of profits, as you said, but that can't be proven just yet, especially because we are in the maintenance season.

Ted Simons:
Do you get a lot of people calling and saying, how come -- the oil companies executives were just talking about tremendous profits in that sector. Why is it that they're making hundreds of billions of dollars profit, and the price still keeps going up and I feel like I'm getting gouged?

Michelle Donati:
It's really difficult to hear about oil companies making record profits. We know that motorists are paying record prices, and a simple trip to the gas station is straining household budgets. Triple-a is encouraging leaders to take an aggressive look at our energy policy and come up with solutions on how dependent we are on oil and gasoline right now.

Ted Simons:
You mentioned "summer blends," what does this mean, summer blends? Explain it to us.

Michelle Donati:
We switch over to a summer blend of fuel, and that usually starts in may. It's cleaner burning and therefore more expensive to produce. It's basically to improve our air quality, which it has been proven to do. And that gasoline is in the metro phoenix area. Outlying areas of the state still use the conventional gasoline. But they end up paying for it in a sense, because less conventional fuel is made to make this boutique blend that improves our air quality.

Ted Simons:
I know diesel prices have been a major focus of concern, especially for truckers. Now there are a lot of consumers, Janes and Joes with their new diesel cars and going, what the heck is happening there?

Michelle Donati:
Diesel statedwide is $3.96, more than a dollar over what it was at this time last year. Those who use diesel are definitely feeling the pinch at the pump.

Ted Simons:
Because it's competing with the gasoline, as far as oil is concerned?

Michelle Donati:
That's one reason.
Back in 2006, diesel was attached to an ultimate low filter blend. That adds about ten cents a gallon. It was the cleanest burning brand of fuel, so there's an increasing global demand for it. There are more people that drive regular and use conventional fuels, so those people need fuel and you have that produced. Then there's additional tax on diesel that we don't see on regular fuel, about seven cents a gallon.

Ted Simons:
As far as Arizona is concerned, where do we stand as far as how much we tax gasoline compared to other states around the country?

Michelle Donati:
There are federal, local and state taxes. Arizona sits below the national average, about 37 cents, in that range, and the average is somewhere in the 40-cent range.

Ted Simons:
Prices up all over, just across the board. It just affects everything. You have to be concerned regarding inflation because, as you mentioned, if a trucker has to pay a higher price to get it to market, that translates over, here comes inflation. This is all tied together.

Michelle Donati:
What people don't realize is that, even if you're driving a vehicle that uses regular gasoline, you're still paying the price for diesel. And that's because diesel takes longer to get someplace if there's traffic, or just costs more to get the product somewhere. That going to cost you a little bit more. Even people that don't drive, you're still paying the price for diesel and these soaring crude prices right now.

Ted Simons:
Well, there you go. Michelle, thanks for joining us. Next time we'll talk about the low prices, how's that?

Michelle Donati:
Absolutely.

Ted Simons:
Thank you.

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