Gas prices on the rise

Spring vacationers drive up demand.

Gasoline retailers decided to make some money, spring vacationers drove up demand, crude oil prices went up, and gas refineries continued to undergo seasonal maintenance, resulting in tighter supplies.

All of these factors converged over the past week to drive retail gasoline prices up sharply heading into Easter weekend — to an average $2.64 per gallon in Florida on Friday, compared with $2.54 a week earlier.

In South Florida, where prices run higher because of the higher price of doing business here, Broward County motorists were paying an average $2.71 — 13 cents more than a week earlier. MiamiDade County’s average of $2.69 was 10 cents higher than the previous week, while the average pergallon price in Palm Beach County of $2.77 was 11 cents more than the previous week.

The national average on Friday was $2.65, compared with $2.59 a week earlier. A year ago, the average U.S. motorist was paying $2.31 a gallon.

At many stations in South Florida, gas prices went up seemingly overnight at the beginning of the week.

Several influences are driving the current run-up, said Mark Jenkins, spokesman for travel club AAA. “Right now, retail prices are adjusting to the growth we saw in the oil and wholesale gasoline markets last week,” he said.

The price of a barrel of West Texas Intermediate crude oil shot up nearly $4 last week, amid concerns about production issues in Iran and Venezuela, from $62.06 to $65.88, then hovered in the mid-$60s throughout this week before closing at $64.94 on the New York Mercantile Exchange on Thursday. The markets were closed for Good Friday.

Wholesale gasoline prices, meanwhile, increased 9 cents a gallon last week.

Combined with those factors, Jenkins said “prices are rising due to strong spring gasoline demand, weakening supplies, and heavy exports — all while refineries conduct maintenance and switch from winter to summer gasoline.”

But another analyst, Patrick DeHaan, head of petroleum analysis at price-comparison website GasBuddy.com, said he’s starting to notice another factor behind quick, sharp gas price increases.

It’s a practice called “price-cycling,” and until recently it was confined to Midwestern states such as Michigan, Illinois, Ohio and Indiana. What happens is one or more large retailers become

“price leaders” by being the first to drive up prices and first to start cutting prices back down. Their influence can ripple quickly across a market because other stations watch the leaders closely, then follow suit immediately.

Because it relies on spotters across the nation, GasBuddy.com notices immediately when a wave of price hikes is beginning and it sends text alerts to consumers with the GasBuddy app, warning them to go fill their tanks at gas stations that have not yet increased prices.

“It’s kind of beating them at their own game,” DeHaan said.

The price cycle theory helps explains why prices seemed to jump in unison to $2.69 across the tricounty region last weekend, DeHaan said.

After prices make their big jump, the next stages involve small decreases and increases, which DeHaan compares to a seesaw. To gain competitive advantage, the large retailers that initiated the big increase will take small decreases of about 4 to 5 cents a gallon. Other stations will follow, and then the price leader will increase a few cents, then decrease a few cents. On it goes until prices fall so low that retailers are no longer making money selling gas, and then suddenly one of the price leaders will increase prices again and the other retailers will follow, and everyone will enjoy 20-cent-a-gallon margins for a while until the price leader drops them again.

DeHaan said South Florida motorists should look for up-and-down price movement that should boost prices into the $2.89 to $2.99 range by the end of May. By then, all of the refineries will be finished with their maintenance, more gas will be flowing through the market, and by June, prices will begin to fall again.