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<< Previous   of   Next >> (click to enlarge)   ADVERTISEMENT   CONTACT THE HERALD Robert Frank, City Editor frank@heraldnet.com   Published: Friday, August 1, 2008 Fuel prices fall as U.S. drives less By Eric Fetters Herald Writer This was predicted to be the summer when gasoline kept going up, up and up, soaring past $4 and ever closer to $5 per gallon. Which is why the past few weeks seem like an unexpected treat. Granted, gasoline is still above $4 a gallon in Snohomish County and it's $1.27 higher than a year ago, according to AAA. But the average price locally is down 20 cents from its peak in late June. The reason why can be explained in two words: less driving. The Federal Highway Administration reported that during May, Americans drove 9 billion -- yes, 9 billion -- fewer miles than they did in May 2007. The U.S. Department of Energy reported that U.S. fuel consumption was down 3 percent in recent weeks compared with a year ago. "There certainly is demand destruction. It's clear that $4 gasoline has changed people's driving," said analyst Stephen Schork, publisher of The Schork Report, a daily energy newsletter. Janet Ray, spokeswoman for AAA Washington, said the cost of fuel seems to be a big factor in people's summer vacation decisions this year. "Part of it is the cost of gasoline, part of it is the economy and part of it is what is happening with the airlines," Ray said. Those factors together mean some people are settling on shorter vacations or trips closer to home, she added. Falling demand for fuel means lower prices for crude oil, which is the biggest component in setting gasoline prices. After soaring above $147 a barrel three weeks ago, oil closed Thursday's trading on the New York Mercantile Exchange just above $124 a barrel. The national average price for gasoline has fallen in the same period from above $4 to $3.91 as of Thursday, according to AAA. The local average price is $4.19, but many stations around Everett are charging 5 to 7 cents less than that. Prices at a few stations have drifted below $4.10 a gallon, although prices at a few stations around the county remain above $4.30 a gallon. Schork said he sees prices continuing to drop in the next three months, with maybe a slight rise around Labor Day weekend. How low does he see average prices going? "I think $3.50 is absolutely doable. I think $3 is a stretch," Schork said, adding he's predicting crude oil will fall below $100 a barrel. He forecasts prices may rebound somewhat around the winter holidays, when demand for heating oil increases. Tom Kloza, chief oil analyst with the Oil Price Information Service, thinks the price relief for gasoline may be more short-lived. In his latest update online, Kloza wrote he thinks prices are on a "summer hiatus." He added that prices may go back up sometime next month and stay higher until October. Kloza and Schork agree on at least one thing: The different solutions proposed for curing high gas price in this election year aren't likely to have a big short-term effect. Kloza wrote it is "pure nonsense to suggest that President Bush' lifting of the executive ban on drilling had any impact on the marketplace." He said finding more oil is part of the solution, along with conservation and other policies. Schork agreed. "I don't think we can drill our way out of this, but we do have to drill," Schork said. "And you also clearly need an alternative fuel source." In the meantime, at least a few companies are benefiting from high oil and gasoline costs. Exxon Mobil Corp. reported Thursday a profit of nearly $11.7 billion during the second quarter, the biggest quarterly profit ever reported by any U.S. corporation. Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.

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