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Thursday, Jul. 24, 2014 — RUSSELL SPRINGS & JAMESTOWN, KENTUCKY — russellcounty.net
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Paying high prices at the pumps (again)
In March 10 Issue
By John Thompson
Times Journal Reporter

Rising gas prices is a concern in Russell County these days, as it is throughout the country and even the world. What seems distinctly different is the lack of outward outrage that usually accompanies such a rise. Instead it seems rising prices are being met with a seemingly quiet desperation that masks a seething anger. At least that's what you hear at the pumps.

"I don't like it," said Leroy Johnson, an 83-year-old retiree living on a fixed income. "I have to stay home more. I just can't get out as much," he said. "You have to cut back on everything," the resignation to the fact clear in his voice.

But then he followed, "Those guys are pocketing an awful lot of money and making us suffer for it," he followed with a sentiment that has been on the increase. "It won't be long until we have to do what they're doing in the Middle East," referencing the revolutionary movements gripping the region.

Johnson's thoughts and feelings are widespread. Jennifer Jones says the higher prices are beginning to cause her family problems.

"It's affecting us pretty bad," she said. Driving a larger SUV, Jones said that she drives twice daily to Adair County to help a family member. Like most people, the complexities of what goes into gas prices aren't fully grasped, but the needed result is familiarly echoed.

 "It's a lot of nonsense, they need to bring the prices down," she said.

Gas prices in Russell County have been rising steadily, and steeply. At the time of writing, gas prices are averaging about $3.50 a gallon in the county, just below the national average of $3.52 a gallon. This is a rise of $.40 a gallon over this time last month.

The last peak in oil prices was in the summer of 2008 when oil hit just over $147 a barrel. Currently oil is trading around $105 a barrel. Gas prices during the summer of 2008 hit a high, hovering around the $4 a gallon mark for most of the months of June and July.

According to a number of attendants at local gas stations people seem to realize that little to nothing can be done about the local price, but it doesn't stop people from voicing their displeasure.

"They seem to understand that our price just reflects the current market," said one, while another said, "We get cussed out at the register, like we can do anything about it." Yet another attendant said she hears how difficult it is becoming for some customers, "I guess that will be enough to get me home," being a refrain she said she's heard more than once.

One consequence of the rising gas prices has been an increase in the number of drive offs from the pumps. Minit Mart on Hwy 127 instituted a "pay before you pump" policy last Thursday due to a rash of drive offs, increasing drivers frustrations, while another large local distributer expressed they would not be surprised if they will soon do the same.

While cash strapped residents of Russell County are beginning to feel the pain, those who travel as a part of their business, or work in trucking have been also feeling the burden. Gas prices are $.77 higher than this time last year nationally, but diesel fuel is averaging $.97 higher. A lot of this cost is offset by a fuel surcharge implemented by most companies locally as well as nationwide, an offset that is eventually passed on to the consumer or results in lower profits.

Bob Flechaus works construction out of Florida and is currently working on the Wolf Creek Dam Project.

"It's ridiculous," Flechaus said. "It's going to put us in another recession."

Flechaus travels throughout much of the country in his business, having recently driven to Kansas, West Virginia, Texas, as well as Florida, where he says gas prices are $.20 higher than here. He also related that he recently came of a job at a St. Croix gas refinery where he said there was "no shortage there," of fuel.

Which begs the question, why are gas prices so high? Certainly everyone realizes the unrest in the Middle East has slowed oil to some degree, but not much.

For example, Libya produces about one million barrels of oil per day, most of which is bound for the European market. While an oil shortage for one is an oil shortage for all in a global market, analysts say supply and demand are not what is driving oil prices.

Sean Cota of the Petroleum Marketers Association of America said "it's unbridled investment money that is dominating the market, to the point where supply and demand doesn't matter anymore."

Cota also says that much of the money being poured into the oil market is coming from pension funds and hedge fund managers who are bidding up the price to the point that last week two-thirds of all the oil traded in the world was not by oil companies, but by investors.

"The total world energy supply is bought and sold everyday about eight times," Cota said. And we can assume that in the vast majority of those transactions a profit is taken.

A common misconception in Russell County is that our gas prices are not in line with prices of surrounding communities. If you read the weekly gas prices in The Russell County News-Register you will see this is not so. Certainly prices in Somerset and Campbellsville trend lower than Russell County, but usually by a few cents, which can be explained by the much larger market. Likewise, smaller communities such as Albany or Liberty are often much higher, again a reflection of a smaller market.

In fact privately owned gas stations make very little on gas, and often depend on a low gas price to entice customers to do further shopping inside. Many gas stations and suppliers are contractually in charge of setting gas prices, and the markup is around $.07 a gallon. This price has been similar for many years, even when gas was running a dollar a gallon. So as prices increase per gallon, the actual percent profit is decreased.

This decrease is exacerbated by the cost stations must pay for the privilege of being able to accept credit cards, who charge on a percentage basis. The two major cards charge a two percent fee on every dollar spent, so that every increase in the price in gas results in a higher fee paid to the credit card company for the business, and less profit from the $.07 markup.

All the explaining in the world will do nothing to allay the hardships that increased fuel prices cause the working man. And there are fears that the price will continue to rise.

According to New York University economist Nouriel Roubini, nicknamed "Dr. Doom" because of his often dire predictions, sees more problems before it gets better. Roubini has become well known because, while his predictions are dire, they're also most often on target. Four years ago he predicted the coming economic collapse of 2008 with prescient understanding. He recently told Bloomberg News that he sees oil once again pushing the $140 to $150 a barrel mark, which, if so, would mean $4.00 a gallon gas again locally. Even more dire is if trouble in the Middle East were to spread to Saudi Arabia, a consequence of which would be oil topping $200 a barrel, he predicts. A level that some analysts would push gas toward the $5.00 a gallon mark.

While cash strapped Russell Countians are already feeling the brunt, others of the middle class say they have yet to feel the effects, and have not had to make adjustments to their lifestyle. But they are eyeing with unrest the increases and the effect on those less fortunate.

A local employer who's business centers around transport requested he not be identified was more than willing to talk, but had an understanding that seems to permeate the current mindset when he said, "I've lived through good times, and I've lived through bad times," he said. "There's no more good times." He went on to say, "It's going to break everybody. How do people who have a family and have to work in Somerset at a low wage make it? They're going to be paying as much in fuel as their salary."

Gerald Snow is a retired auto worker who receives a good pension along with Social Security, but he's aware of the effect it's having on "everything," including gas prices.

"I feel sorry for the working people," Snow said. "I have a son who drives 80 miles to work every day, the other day he told me 'Dad, I don't know what I'm going to do.'"

The outrage is there, it seems, it's just that it's not expressed these days. More than once was viewed an apparent man and wife eyeing the pump as one of them pumped the gas in, and overheard were conversations about how much they should get at that time. The disheartened countenance of everyone asked reflected what they would say, when asked; that there was nothing they or anyone could do about it.

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