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Gas prices expected to drop in 2014

Dramatic price swings to continue throughout the Midwest, report says.


The cost of filling up at the pump is expected to drop this year, but Ohio drivers should be prepared for more of the dramatic price spikes and dips that have been commonplace in recent years.

An increase in domestic oil production, more fuel-efficient cars and reduced demand are expected to produce lower prices in 2014, according to AAA and GasBuddy.com. The gas-tracking web site predicts that this year’s average price in Ohio will fall between $3.15 and $3.40 per gallon. The average price in the Dayton-Springfield area on Tuesday was $3.19.

Per-gallon prices are supposed to continue dropping — to an average of $3.03 by 2017 — according to the U.S. Energy Information Administration. While below last year’s average of $3.49, it’s still far off the $2.35 average price in 2009. The nation’s high mark for a gallon of gas was 2012, when it averaged $3.61, according to AAA.

For businesses that burn a lot of gas, every penny counts. Walt Brown operates Walt’s Taxi Cab Service in Dayton, which has a fleet of four Dodge Grand Caravans. His drivers, who are independent contractors, save at least $20 a day from a dollar drop in gas prices, he said.

“We had $4 per gallon not long ago, then it went down to $3,” he said. “On a weekly basis, that’s a significant savings.”

Brown said his Dodge vans can get up to 20 miles per gallon if driven properly.

“Driving like a madman doesn’t accomplish anything,” he said.

Volatile prices

Drivers in the Midwest are used to wild price fluctuations. The wild swings led to a Federal Trade Commission investigation in 2010 and 2011. The FTC concluded in May 2011 that the up-and-down prices do not harm consumers and found that such “price cycling” is “generally a phenomenon of the upper Midwest.”

The analysis — the first since the cycling started in mid-2000 — “is a form of retail price war,” according to the FTC report. “We find consumers are better off on average in cities after they began cycling,” the report says.

Gregg Laskoski, senior petroleum analyst for GasBuddy.com, said gas prices in Dayton rose by 30 cents in a single day in 2013. In Fort Wayne, Ind., prices increased 34 cents in one day. Outside the region’s seven-state footprint, the largest one-day change was 14 cents, in Lubbock, Texas.

“You’re in a region where there’s more price volatility than anywhere in the country,” Laskoski said. “You see price jumps that are incredible. It’s created and perpetrated by the dominant retailers. They have huge spikes and come down. Once they hit the floor they go way up. It’s got to be extremely frustrating for consumers.”

Laskoski expects the trend to continue in the region. Last month, the U.S. average price for a gallon of gas floated within a 7-cent range. Dayton’s average price per gallon fluctuated by 43 cents.

Jamal Kheiry, spokesman for Marathon Petroleum Corp., based in Findlay, said the price moves in the Midwest are influenced by many factors, including the price of crude oil.

“The retail gas market is extremely competitive,” he said. “You have different factors and costs and it could be any number of those factors.”

Working the land

Marty Grunder, president and owner of Grunder Landscaping Co. in Miamisburg, says his crews do everything they can to save money on gas.

“When we set up pricing models we take into account what fuel prices will be; it’s a significant expense,” Grunder said. “We try to control things we can control — not idling trucks, replacing old ones with newer, fuel-efficient models, not as many diesel trucks.”

Grunder has 32 vehicles, including 20 heavy-duty trucks that get between 4 and 9 miles per gallon. The company also needs fuel for smaller equipment, including trimmers and mowers.

“A lower gas price is good for everyone because anything you consume has fuel involved,” he said. “It reverberates through the economy and it affects the psyche of the consumer.”

Philip Jagiela, executive director of the National Limousine Association, said gas is third or fourth on the list of expenses for his group’s 2,200 members.

“Gas costs have a dramatic impact because when it spikes we can’t recoup those costs,” he said. “Many of our operators work on fixed contracts.”

Gas taxes

Taxes add to the price motorists pay at the pump. The federal gasoline excise tax has been 18.4 cents per gallon since 2007. Meanwhile, states charge a wide range of rates. In Ohio, it’s 28 cents, which brings the total tax on a gallon of gas to 46.4 cents. That is lower than any state that borders Ohio.

Pennsylvania raised its gas tax last week and it now totals 60.2 cents per gallon, one of the nation’s highest rates. Taxes in other neighboring states: Michigan, 57.7 cents; Indiana, 56.6 cents; West Virginia, 53.1 cents; Kentucky, 50.7 cents.

According to GasBuddy.com, 2013 might mark the first year for increased demand of gasoline since the peak year of 2007. That year, gasoline demand averaged 390 million gallons per day, compared to 365 million gallons in 2012.

More than 130 refineries nationwide must make their more expensive summer blends available by May 1, which means higher prices in the spring.

“They shut down enough of their production that it creates a tighter supply of gas in February, March and April,” Laskoski said. “It’s like clockwork.”



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