Increase in petroleum wholesale costs push area gas prices back up

By Thomas V. Bona

BusinessRockford.com

Gas prices jumped about 20 cents at some Rockford stations this afternoon, slashing into the savings gained in the past few weeks.

Road Ranger moved its prices to $3.97 a gallon for regular unleaded this afternoon, and several other stations have similar prices, according to illinoisgasprices.com.

The increase mirrored a 21-cent increase in wholesale gasoline prices Tuesday and Wednesday, Road Ranger President Dan Arnold said. Prices rebounded amid surprising news that supplies of U.S. gasoline had dropped and Israeli Prime Minister Ehud Olmert’s announcement he was stepping down.

Today’s rebound at the pump may also be a case of prices having fallen too far, too fast.

Retail prices in Rockford have dropped 40 cents in the past month and 50 cents in the past two weeks, Road Ranger officials said. Meanwhile, wholesale prices dropped only 15 cents in the past month and actually increased in the past two weeks.

“What happened was (retailers) just got ahead of themselves because they were hoping the price was going to continue to fall. Everybody was hoping for $100-a-barrel or $80-a-barrel oil,” Arnold said

Retailers cut prices to revive customer demand, which is down from last year. According to a report by MasterCard Advisors, U.S. gas demand increased slightly last week, but was still down 4 percent from this time last year.

Arnold said having gas above $4 a gallon really curbed demand, and retailers tried to get below that mark as soon as possible, cutting into already slim profit margins to reduce prices sharply.

But with the rebound in petroleum wholesale prices — which is how much retailers pay for their product — Road Ranger couldn’t charge less any longer.

“We’d be out of business if we ate 21 cents a day for several months,” Arnold said.

He expected prices to start falling again and thinks oil still could retreat as low as $80 a barrel.

Today, when markets closed, oil was down more than $2 to $124 a barrel, while wholesale petroleum dropped 2 cents.

If oil starts going up again, Arnold said he’ll only go past $4 a gallon for gas “kicking and screaming.”

Contact staff writer Thomas V. Bona at 815-987-1343 or tbona@rrstar.com.