By Nathan Mayberg
MONTICELLO — September 2, 2005 – On Tuesday morning, most gas prices in Sullivan County were sitting around $2.69 for regular unleaded.
By that afternoon, as news of the disaster in Louisiana and Mississippi continued to ripple northward, prices rose another 10 cents. On Wednesday morning, they shot up to $2.99. By the afternoon, most gas stations were selling unleaded – 87 octane – for around the $3.21 mark.
As the news out of New Orleans grew worse, with thousands believed dead and oil refineries shut down, prices are expected to keep rising.
Several oil rigs were reported floating in the Gulf of Mexico. President George Bush announced on live national television that oil production had been damaged by the monstrous hurricane. Some reports estimated that several oil refineries off the coast would not be able to resume action for at least a week.
Despite the obvious national disaster – considered the worst since the 1906 San Francisco earthquake – there were many who were skeptical of how prices jumped by about $.50 a gallon in a couple hours’ time. Some customers believed the gas stations were using the tragedies in the South to boost their profits. After all, the companies had not received gasoline shipments at the time they were raising their prices. And what about all of the gas the companies already had in stock before the hurricane?
Reasonings behind the sharp jack-up in prices varied from store to store.
Bill Dake, CEO of Stewart’s Shops (which owns all the Stewart’s gas stations in New York and Vermont), defended his company’s sharp rise in gas prices on Wednesday.
Stewart’s was one of the first stores to lift their prices from around $2.69 Tuesday evening to $3.23 on Wednesday morning.
Dake blamed the increase on a combination of the effect of the price of crude oil on the mercantile exchange, which had recently pushed to $70 a barrel, before dropping a dollar due to a release in some federal oil reserves. The rest of it came from the damage to oil refining abilities in the Gulf Coast due to Katrina.
He said the company has three days of inventory on the ground and makes a profit of 15 cents on every gallon of gas.
When asked why some Stewart’s shops were boosting their prices without a delivery, Dake said it was only a “matter of a couple of days” before they received new shipments. He also claimed that “we don’t keep track of deliveries.”
Lori Whitmore, the manager of one of the local Stewart’s shops, said she raised her prices based on an order from the district manager, who blamed the increase on oil supplies decreasing. She said the prices would continue to rise on Thursday.
Whitmore said that run-offs had risen recently, and nobody had yet been caught.
Valero, a gas station on Route 42 in Monticello, opened up Wednesday morning with their basic unleaded prices sitting at $2.69. By the early afternoon, they were up to $3.13.
Their general manager, who would only identify himself as the man who operates the store, said he lifted his prices when “we got a phone call from our supplier.” Eddie said the supplier warned him that the cost of gas would climb.
“It’s crazy, because Labor Day weekend is coming up,” he said. “I hope it’s not a ploy. People are still filling up. I honestly think people are not going to be traveling as much. ... I honestly believe prices will go up even more.”
When the installer of the shop’s new lottery machine complained that stores were elevating their prices when their tanks were full, Eddie replied that he had just received a shipment today.
The cheapest gasoline between Tuesday and Wednesday in Monticello was clearly the Mobil on Broadway. Its owner, Kamran Khan, held out his number at $2.69 for regular unleaded until mid-afternoon. That brought a 1970s-era waiting line for gas that stretched onto Broadway itself until he said he was forced to raise the price up to $2.99, the same as across the street at Exxon. Khan said that if he didn’t do so, he would run out of gas. He wasn’t expecting another shipment until Thursday morning. Like others, he predicted the price to keep moving up.
He also expected the gas highs to keep travelers at bay this weekend.
“They probably will stay put. You’re spending more money here, you will spend less money somewhere else,” Khan remarked.
At least one government official was more than skeptical – and he is taking aggressive action.
On Wednesday, New York State Senator John Bonacic called for more controls over oil prices in New York. He said he will be asking Governor George Pataki to bring the State Legislature back to session in order to consider oil price gouging. He will recommend that the Public Service Commission set the prices for gas in the state. In addition, he will support a move to cap the sales tax on gas to the 2004 average.
“I believe price gouging is going on. Calls should be made to [New York State Attorney General Eliot Spitzer],” he said.
Bonacic is pushing local Congressional representatives to call for an investigation by United States Attorney General Alberto Gonzales into the business practices of oil companies, refineries and “middlemen.” He said he has spoken with Spitzer’s office, who told him they are monitoring the issue.
He noted that major oil companies like Royal Dutch/Shell and others have posted profits ranging from 29 percent to over 50 percent over the last year, while oil prices have soared from about a national average around $1.86 last year to the current mark of over $3.
The state senator was particularly disturbed by the fact that prices rose significantly before the hurricane, as well as after.
On Tuesday, United States Senator Charles Schumer (New York), along with U.S. Senator Olympia Snow (Rhode Island), called on Bush to release a portion of the Strategic Petroleum Reserve. On Wednesday, Bush did just that as a loan to some companies who requested their dwindling inventories be resupplied.
Congressman Maurice Hinchey said the opening of the reserve’s taps is “too little, too late.”
“This is something the president should have done long before the hurricane,” said Hinchey, “when gas prices were already rising.”
Now, said the Congressman, petroleum companies’ feet need to be held to the fire.
“The fact of this matter is that the oil companies have been exploiting this situation to make extraordinary profits,” he alleged. “The oil companies are literally awash in cash.
“We must have a complete investigation by the Federal Trade Commission to uncover the practice of price-gouging by oil companies,” he continued. “We need to get to the bottom of these anti-trust practices and stop the oil companies from bleeding the American people to death with the price of gasoline.”
Hinchey said he will be introducing legislation to create an excess profits tax on the oil companies.
Paul Larrabee, a spokesman for Attorney General Spitzer, said, “We are considering what is the next step to take” in response to the drastic swelling in the gas market. He said there have been several reports of price-gouging. Larrabee encouraged anybody with evidence of such activity to share it with the Attorney General’s office.
Customers were generally taking the news badly. Art Solomon of Forestburgh, the owner of Yankee Barn Lighting in Monticello, was at the local Citgo, which had the lowest prices in town during the late afternoon, at $2.99 a gallon.
He said the spike would have a ripple effect throughout the economy, which would ultimately hurt “the little guy” the most.
“In general, all of our expenses will go up,” he said.
His company, which does a lot of importing and exporting, was being showered with higher delivery costs.
Two years ago, he said, a container from Europe ran $2,200. Now, half of a container was going for the same amount.
American companies were driving up costs just as well, he said. Every time he made a purchase, the delivery expenses were higher. The prices of steel and brass were continuing to move upwards, while manufacturing companies in this country are being driven out, he said.
His vehicle cost $67 to fill up on Wednesday.
“I said when it hit $50 I would get rid of it,” he remarked. “What does the little guy do?”
Robin Seward, former Village of Monticello treasurer, who was pumping gas into her car at Stewart’s, said in frustration, “We can’t do anything about it.”
She now commutes to Westchester County each day for work.
“It’s quite expensive. It cost me $40 to fill up a tank [on Wednesday]. It [used to] cost $22.”
But one couple traveling from Rhode Island seemed to take the action in stride. Said the wife, “Oh well, you have to pay it.”