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Western Pennsylvania drivers could expect gas prices to exceed $4 a gallon

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Saturday, June 7, 2014, 9:00 p.m.
 

Western Pennsylvania drivers shouldn't expect any relief soon from bloated prices at gasoline pumps, industry leaders and analysts say.

“I don't see any real inspiration in the prices” through summer, said Donald Bowers, manager of petroleum and transportation for Superior Petroleum Co., a wholesale distributor in McCandless, who predicts prices could eclipse $4 a gallon by July 4.

Gov. Tom Corbett last month signed a law directing state officials to lobby federal regulators to drop a requirement that stations in seven counties surrounding Pittsburgh sell only a special “summer blend” gasoline that causes less air pollution.

That blend, which stations had to start selling last Sunday, costs more and is harder for dealers to get, driving the price up further.

The process of persuading the Environmental Protection Agency to remove the summer-blend requirement won't wrap up until at least next year, according to Corbett's energy executive, Patrick Henderson. Bowers said it could be four years.

The move to summer blend during the past month — combined with lingering shortages on pipelines from a tough winter, high demand and the removal this year of a cap on the state's oil company franchise tax — pushed prices to an average $3.81 per gallon in Pittsburgh last week.

That's 17 cents higher than the national average and 25 cents higher than a year ago, according to price-tracker GasBuddy.com.

“If things go as normal, we see it maybe dropping 10 cents thorough June, but maybe not that much,” said Michael Green, a spokesman for AAA's national office in Washington. “Four dollars is certainly not out of the question, but it would take a significant refinery issue.”

‘It happens every year'

The pain at the pump usually starts in Western Pennsylvania each May, when refineries and wholesalers start sending out gasoline with a lower evaporation level — called a Reid vapor pressure, or RVP — to meet EPA regulations in areas with heavy air pollution. Prices go up between 10 cents and 15 cents per gallon.

“It happens every year, and causes a spike,” said Nancy Maricondi, executive director of the Petroleum Retailers & Auto Repair Association in Braddock Hills. “It does cost a little bit more, but the main thing is it causes a supply problem.”

Prices were inflated, hitting national highs on April 28, AAA said. Bowers blamed pipeline problems that began with an unexpected spike in demand for diesel fuel in Western Pennsylvania prompted by a harsh winter.

“During spring, they were trying to catch up and at the same time trying to switch over” to the summer blend,” he said. “That's caused some severe supply problems that aren't going away.”

Maricondi and Green expect prices to even out or drop slightly as demand ebbs until August and supply picks up. Bowers does not.

“I can see inventories level off right when we're switching back in the fall,” he said.

‘The new normal'

The switch back and forth will continue for at least another year. The law Corbett signed May 14 directs the state Department of Environmental Protection to identify other ways the state and industries have reduced ozone-generating compounds in the air and calculate measurements.

The DEP can then ask federal regulators to substitute those measures for the benefits Pennsylvania gets from the special gas.

“The EPA will not let this happen unless there's a commensurate exchange,” Henderson said.

Even without summer gas, drivers must absorb high taxes and unpredictable market issues. Green and Maricondi noted that refinery problems and hurricanes in the gulf can quickly jack up prices here. International crude oil prices — which account for two thirds of the pump price — can fluctuate with geopolitical crises such as the situation in Ukraine.

The gradual drop of the cap on the franchise tax that companies pay in Pennsylvania will add to prices that include some of the highest state taxes in the nation. According to the American Petroleum Institute, state and federal taxes in Pennsylvania total 60.2 cents per gallon, higher than the rates in all surrounding states except New York.

“It seems $3.50 to $4 a gallon has become the new normal,” Green said.

David Conti is a Trib Total Media staff writer. Reach him at 412-388-5802 or dconti@tribweb.com.

 

 

 
 


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