Motorists Told To Drive Less As Gas Prices Peak

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President Bush and the American Auto Association (AAA) are telling us to reduce our driving and not buy gas if we don't need it. Gas prices continue to rise especially overnight and the analysts keep saying prices are going to get higher so much that the analysts seem to be setting the price of gas.

Deliveries to independent gasoline stations are slowing down and the major stations are controlling their greed by splitting hairs when queried. Without deliveries, their response to my inquiries is that they are repricing their in-ground gas supplies every day but repricing less than their competitors. The different states apparently have different definitions for what is considered “gouging” but exploitive pricing has one boundary–the top one.

In New Jersey, stations are only allowed to reprice once a day by state law but that has not stopped stations from repricing three or four times a day. Violence is expected if the situation persists except that the presence of gas at reasonable pump prices in the $2.50-$2.60 range will probably help contain any violence for a short while at least.

Two major pipelines and up to eight refineries have been shut in the wake of Hurricane Katrina. The gas crunch is hitting the East and Midwest hardest and some gulf-based suppliers have begun rationing their deliveries. Already tight reserves of regular gas are going fast leaving mid-grade and premium to be sold only reluctantly. Tom Kioza of the Oil Price Information Service provided this information speaking with USAToday.

“They don't know if they are going to get their next load,” said Pat Moricca, president of the Gasoline Retailers Association of Florida speaking with USAToday.

The mercatile exchanges are seeing gas surge, sending prices up 25% just this week. October deliveries of unleaded gas are trading at $2.42 with an increase of 16 cent this week. Crude oil contracts for October delivery are over $69 a barrel now. Tom Kioza of the Oil Price Information Service provided this information speaking with USAToday. Red Cavaney, CEO of the American Petroleum Institute speaking with USAToday reports that the 21-day supply was the lowest reported in two years.

A good question is how will rising pump prices affect the Internal Revenue Service (IRS) has established optional standard mileage rates to use for computing deductible automobile operating costs. These rates are used to calculate business, medical, or moving expenses for cars including vans, pickups, and panel trucks. Current standard mileage rates are available from the IRS web site.

Going into the three-day Labor Day weekend, AAA spokesman Geoff Sundstrom said, “At this point, anything that can do to limit their discretionary driving and conserve fuel would be helpful.”

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