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Gas Prices Continue to Rise in WNY

11:16 AM, Mar 6, 2012   |    comments
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BUFFALO, NY - On Monday, gas prices reached an average of $3.80 in Western New York for a gallon of regular unleaded.

That's 4.5 cents higher than one week ago, 17.7 cents higher than one month ago, and 47 cents higher than on this date last year.

"We continue to see the price of crude oil going up," said Patrick DeHaan, a Senior Petroleum Analyst with GasBuddy.com.

While DeHaan notes the existence of the usual suspects behind the latest price increases, such as higher global demand and market speculation, there are now new tensions in the Middle East, where Iran is reducing exports in response to sanctions over its nuclear program.

DeHaan says trouble in the Middle East can actually affect East Coast refineries-- where we get our gas --more than Midwest refineries, which serve areas of the country where pump prices are generally lower.

"East Coast refineries rely on imported crude oil which can cost as much as $30 more per barrel, than say, what other refineries in the Midwest are paying."

DeHaan says this is because those refineries have access to cheaper oil, now being produced at a break neck pace in the Dakotas and Canada.

"Crude oil in the northeast has to be imported, because there's no pipeline that really connects it to the cheap crude oil, so there are limited options for those refiners which means they have to pay a higher price," DeHaan explained.

DeHaan says crude from the Bakken fields is cheaper in part because it's land locked, and therefore it has a limited customer base. And while he says pipelines from those fields  to other parts of the U.S would be helpful in bringing down prices domestically, he cautions that if the pipelines were extended to seaports, then that crude would become pricey as well, because it would become available to a world-wide mass market.

"Ten years ago the Chinese were sipping oil from a straw. Now they're shooting it from 24-packs, and looking for more," DeHaan said, in reasoning that the economic principles of supply and demand would dictate that the market value of the Bakken crude, once made available for export, would skyrocket.

Last Spring, when crude prices fell but gas prices didn't, U.S. Senator Charles Schumer (D-NY) asked the Federal Trade Commission (FTC) to investigate if refiners were inflating prices by decreasing supply.

It agreed to do that in June.

A spokesman for Schumer says the FTC is yet to complete the investigation, and on Monday we couldn't get anyone from that agency to say how that's coming along, due to the federal holiday.

But in September it did produce a separate report, which concluded: "crude oil prices continue to be the main driver of what Americans pay at the pump".

As well, NY State Attorney General Eric Schneiderman's office spent most of last year investigating if there was price gouging going on, but his report also concluded: "(gasoline) price increases were primarily driven by changes in the price of crude oil, not actions taken by gasoline retailers or wholesalers."

This leads DeHaan to conclude that while such probes might reduce the risk of anyone trying to gouge on prices (because they're more aware that they are being watched) there really might not be much those on Capitol Hill can do, outside of posturing.

"That's right, that's right, you know these politicians...it's their big subject... it's the hot topic, everybody wants to fight high gas prices. You have the FTC and attorneys' general looking into collusion, but this is just the free market at work, unfortunately."

That didn't stop Schumer from suggesting another strategy while in Syracuse on Monday, where he said the Obama administration should urge Saudi Arabia-- no friend of Iran-- to increase production, in deference to US efforts to stem Iran's nuclear capabilities through sanctions, which has caused Iran to reduce its exports.

"The Saudis and the gulf states ought to pump more oil immediately, and that's what our government ought to do....it ought to tell the Saudis, 'you know, we're trying to keep Iran in line by squeezing them economically', and (you) ought to pump more oil so the price doesn't go up," Schumer said.

Click on the video player to watch our report from 2 On Your Side Reporter Dave McKinley and Photojournalist Dave Harrington

Click here to read Dave McKinley's latest blog.

WGRZ-TV, wgrz.com

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