2005 gas prediction price summer

Expect to see record prices at the pump; Cost of gas likely to leap

Jose Ortiz cringes when he considers that a tank or two of gas will soon cost nearly as much as his car.

Fifty dollars was a bargain for the aging Mercury Marquis, but half a C-note would be an excessive price for enough fuel to get the Milwaukee resident back and forth to work over the course of a week.

But Ortiz and other motorists should brace themselves for record gas prices in the coming weeks, based on market trends and predictions of a 24-cent per gallon increase over the next week to 10 days.

That projected spike would drive the average price in the area upwards of $2.30 per gallon, well above the record of $2.17 per gallon reached in October 2004. The average price reported in the area on Friday was $2.08 a gallon, up almost 30 cents from one year ago.

"It's going to be tough going for the next few months," said Mike Bie, a spokesman with the AAA Wisconsin. "Gas prices are high now, and we're heading into a time of year when we know to expect price spikes."

Fuel prices in Wisconsin typically increase from March to May, a time when refineries switch over their facilities to produce the special summer blends of gasoline for the metro area and reduce their production for maintenance. Across the country, gas prices have increased from March to May in 19 of the past 20 years, according to Peter Beutel, a fuel industry analyst with Cameron Hanover, an energy management firm based in New Canaan, Conn.

Beutel this week predicted the 24-cent increase in the pump price over the next week to 10 days. He based his projection on raw crude and commodities prices, which approached records for much of the week.

Analysts blamed the surging crude oil prices on fears that the worldwide oil supply will be strained by the demand to fuel the growing economies of India and China. Speculative investing in the commodities market, primarily on the part of institutional investors, also helped drive up the price of raw fuel products.

And the market as a whole remained anxious, waiting for OPEC oil producers to meet on March 16 and decide whether to increase production.

Regardless of the reason for the price increase, those high wholesale and market increases will appear at the pumps soon.

"You're going to see 10 cents to 12 cents before you can turn your car around," Beutel said. "By Tuesday, 90 percent of the stations in the country will have had to replenish their stocks, and that will be at a higher price because of the increase on the New York Mercantile Exchange.

"Everybody's going to be at a record."

Those projected record prices will be a burden, not just on industries heavily dependent on fuel but on nearly all the consumer economy, Beutel said.

He estimates that a 10-cent increase at the pump costs consumers $38 million per day. If his 24-cent prediction comes true, motorists will spend an extra $90 million per day on gas.

"It's hurting everyone on a multitude of levels," Beutel said. "Everywhere along the line here, this eventually has to hit the food chain, and it has to hit any product that needs to be transported."

That means consumers will be paying more for everything, from food to flowers.

Steve Graham, vice president of purchasing for Schneider National Trucking, said his company typically makes up about 70% to 90% of increases in diesel fuel costs by raising its prices for its customers. Already coping with a significant jump in diesel fuel prices over the past six months, Schneider has had to absorb the remainder of the added expense of running 14,000 trucks and consuming 250 million gallons of fuel yearly.

On a smaller level, Ron Reel, owner of Floral Expressions in Cedarburg, said he would have to raise his delivery charges to counter the projected increase in gas prices.

"It stinks," Reel said. "We've been hoping and praying that the price would come down."

Matt Dinnocenzo, a delivery driver for Papa John's Pizza, won't be able to pass along the gas price increase to his customers. The 22-year-old Milwaukee driver is paid 75 cents per delivery, whether gas costs him $1.75 or $2.30 a gallon.

Filling up his Chevrolet Cavalier on Friday, Dinnocenzo pondered the financial impact of record high gas prices.

"That's going to make my job a lot less profitable," he said. "I'm going to have a lot less money to go out and have a good time, or go drive for a vacation."

Fuel analyst Beutel said the expected cost increase at the pump will be hardest on senior citizens living on fixed incomes and young people scraping by at or near minimum wage. They will be looking to spend less in other areas to cover gas costs.

Whether a gas price of $2.30 a gallon will change driving habits remains an unanswered question.

$2.30

Projected price of regular gas in Milwaukee area within 10 days.

$2.17

Previous record, reached in October 2004.

$2.08

Average price in the area on Friday. That is up almost 30 cents from a year ago.

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