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May 29th, 2007 - Heidi Rambo Centrella

Record gas prices hit Oklahoma



Consumers and businesses alike feel wrath of unusual price spikes

A retired Oklahoma couple on fixed incomes had to decide last week between a trip to visit their niece in Arkansas with terminal brain cancer and a trip to the pharmacy to purchase their prescription medications. The niece only has a few months to live, doctors say, and they are her only living family members.

This is just one of many calls from concerned consumers AAA's Chuck Mai has heard from since gas prices began rising.

"It's really a hardship on people," he said. "People are truly suffering. They are dealing without other necessities just to buy their fuel."

Industry reports show the most affected areas are the Midwest and southern region, including Oklahoma, Texas and Louisiana primarily, which Mai says is unprecedented.

The problem, he says, is not solely the refineries that have suffered devastation, but, ultimately, there is a chronic capacity problem with the industry in America that needs to be addressed.

"Not only have we not seen any new refineries built in 30 years, the ones we have have not been well maintained," Mai said. "The refineries are very vulnerable. They need to be maintained properly. We need to encourage the industry, we need to even encourage government, to put mandates on the industry that will ensure this kind of situation doesn't happen again."

Mike Bernard, president of Mid Continent Oil and Gas Association of Oklahoma, says the nation is facing unusual seasonal price spikes. And it has little, if anything, to do with the cost of crude oil, which typically is the primary factor behind the cost of fuel.

"Overall, refineries have been operating below 90 percent for about 18 consecutive weeks," Bernard said.

Part of this, he says, can be attributed to the annual spring price increase which is the result of regular spring refinery maintenance schedules, such as the gasoline change-over from winter-grade to summer-grade fuel.

"Plus we have the fact that several refineries have had some breakdowns, which we can't forecast, such as the problem at Wynnewood," he said. "All those things combined have just led to what is an unusual price spike. But I think people in the industry think it will settle down."

Double-whammy

One local businessman is skeptical, however.

Michael Gurley says he is no longer able to absorb the cost of rising fuel prices, and that those in the floral business are getting a double-whammy.

"The wholesalers give us a fuel charge and a delivery charge on top of the cost of flowers," said Gurley, owner of Michael's a Fine Florist, 7654 N Western. This, combined with the rising fuel prices, is forcing him and others in the floral business to raise delivery charges.

Florists are now paying a fee to wholesalers between 3.5 and 4 percent of their total merchandise cost. This is up from about 2.75 percent at the same time last year.

"When you add that up per stem, it's only a couple of pennies, but it really does add up," he said.

In addition, he and others are having to pass the increased costs on to consumers by raising delivery charges.

Gurley says his across-the-board delivery charge is up to $8, but if customers want what he calls a timed delivery, they'll have to pay an additional $10-$20.

"They pay a special charge because I have to take an employee and a truck out of route," he said. "People understand it. They don't like it, but they understand it."

This, he said was especially the case around Mother's Day. "They didn't care," he said.

Gurley says one saving grace has been the Metro Oklahoma City Florists Delivery Inc. program, which consists of about 20-30 members.

With the more than 25-year-old coop, local florists meet in a central location with their daily deliveries, divide them out according to area - or zip code - and keep each other from having to drive all over the metro area making deliveries.

"It's all done with floral employees, it's not a 'delivery service'," he said. "My employee who knows how to handle flowers will deliver somebody else's flowers. And my flowers will be delivered by another florist in their area.

"It's very efficient," he continued. "It saves money. It's doesn't make money, but it does save money."

The future looks bright

Echoing Bernard's sentiments, Mai says he predicts positive change in the near future.

"I really think we're seeing the light at the end of the tunnel," he said. "Wynnewood is back up and running at nearly 100 percent."

Furthermore, many of the refineries that were down in April are coming back online and making good progress toward resuming full operation.

"If we can just get through Memorial Day, then I'm convinced we'll see prices begin to moderate."

As of press time, the highest recorded price for regular unleaded in Oklahoma City was $3.299 on May 22, up from $2.592 the same time last year.

For more information on daily gas prices, view AAA's Fuel Gauge Report at www.fuelgaugereport.com

 
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