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Summer months are almost certain to bring additional increases in gasoline prices

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Posted: Sunday, March 23, 2008 12:00 pm | Updated: 5:06 pm, Wed Aug 15, 2012.

By Don Bolding

Killeen Daily Herald

One person's gas guess is as good as another's about how much fuel prices will go up, but it's almost certain that they will over the next few months.

They always do as summer approaches, because demand goes up as people drive more in the spring and summer and refiners are required by environmental law to produce more expensive summer mixes. But whether they'll reach the dreaded $4 a gallon mark currently rumored is pure speculation at this point.

Around Central Texas, nobody seems to have mothballed their cars for bicycles yet, but people are doing calculations and making shifts to increase fuel economy.

Paula Lohse of Toyota of Killeen said sales are brisk because of demand from soldiers recently returned from Iraq and their families, but there's a marked preference for smaller vehicles, and hybrid models of the Prius, Camry and Highlander are gaining popularity all the time.

"Sales are pretty much what we had projected for March, taking high fuel prices into account, but you can sense a hesitancy and caution in buyers," she said. "The bigger cars and sport utility vehicles have really lost popularity."

David Baxter, a sales representative with Killeen Auto Sales, said, "We're not having any problem with volume because we've got Fort Hood, but people are conscious of fuel efficiency. We're having to make sure we have enough fuel-efficient vehicles in stock."

Despite that, general manager John Gilmore of Big Chief Distributing Co., a fuel wholesaler, said he hasn't noticed much effect on sales volume. "I've heard some stories that gasoline might reach $3.40 a gallon by summer and other stories that the government might step in and cap prices. We just don't know yet." But he said he hasn't heard of much demand for flex fuels or ethanol, probably partly because no widespread delivery systems are in place.

Patton Kaufman, president of First Texas Bank in Killeen and board chair of the Greater Killeen Chamber of Commerce, said earlier that more checks start bouncing when fuel prices rise, but he said this week that the pattern had leveled off a little. "I think it means people have started adjusting to things as they are. They're learning to take fuel prices at current levels into account in their spending. I do think that if prices rise much more, people might start looking at alternative forms of travel. I had to buy an airplane ticket to Philadelphia this week, and it was about $300. I was surprised it was still that low. But how long does it take to drive to Philadelphia, about four or five days? If I had the time, I'm sure the cost of that fare would be less than the cost for gas."

As a matter of fact, the American Automobile Association has an online fuel-cost calculator. Kaufman didn't say what kind of vehicle he was contemplating, but the calculator works for a number of makes and models, and a round trip to Philadelphia from Dallas in a 2007 Honda Accord would have cost $319 Thursday. Knowing that might induce people to whip out their calculators to figure ancillary expenses like motels and taxis.

The airlines are hard-pressed, because jet fuel is going up, too. Air fares fluctuate wildly due to a patchwork of factors, but Tim Wagner of American Eagle in Fort Worth, which serves Killeen, said fares had gone up over the past few weeks. "Jet fuel cost us 88 cents a gallon in 2003; it costs $2.75 a gallon now. A one-cent increase in the price per gallon increases our cost of operation by $30 million per year. We've used 771 million gallons in the first quarter of 2008."

Killeen aviation director John Sutton, without referring to the local airlines, said some carriers are instituting surcharges and various kinds of price options. "But fares vary so much anyway, it's nearly impossible to tell what factor caused a particular price increase or decrease," he said.

One option some airlines have mentioned is to cancel some scheduled flights. Wagner said American Eagle had made no announcements about that possibility. No local information was available about the other two airlines serving Killeen-Fort Hood Regional Airport, Delta, which flies from here to Atlanta, and Colgan, a Continental shuttle service to Houston, although Delta and Continental both announced price increases nationally, and Delta planned to discontinue service to Islip, N.Y., Bellingham, Wash., and Fargo, N.D.

Greater Killeen Chamber of Commerce president John Crutchfield said he doesn't have any hard figures yet but believes that although consumers are trimming costs where they can, effects on the economy in terms of rising prices are marginal so far. "For example, we're planning a weekend family trip and are thinking hard about whether to take a more spacious vehicle or my wife's littler car. People still have to get around. We might see more drastic effects if gas hits $4 a gallon, though."

Jerry Haisler, director of the Killeen center of Workforce Solutions of Central Texas, said he thinks people are getting more cautious about where they choose to work, minimizing commuting distance. "Also, more people are having to take second jobs because of fuel and the price increases forced by transportation costs," he said. "Transportation is an issue because it has to be dependable. When rising gas prices are piled onto mechanical maintenance, people cut back on entertainment and anywhere else they can because they still have to buy food and pay their utility bills. The good news is that the job market continues strong so that few people have to drive outside the area to find work."

Consumer caution may be having an effect. The U.S. Energy Administration said Thursday that overall consumption of oil and petroleum products had fallen 3.2 percent over the past four weeks compared with the same period last year. Demand for gasoline fell by 1 percent, and oil prices dropped below $100 a barrel. The price fell $5.96 to $102.54 a barrel Wednesday and another $3.14 to $99.40 a barrel Thursday, all because of falling demand. Refiners' profit margins went negative several times during the week.

Still, prices are almost certain to stay high, with diesel and jet fuel spiking higher than gasoline, forcing up the price of everything that has to be transported. The American Automobile Association has not released a summer forecast yet, but the forces that cause a seasonal jump in prices will have their usual effect.

But so will a drop in demand. Signs are that if people tighten their belts enough, they can make some of their own luck.

The Associated Press contributed to this report.

Contact Don Bolding at dbolding@kdhnews.com or call (254) 501-7557.

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