Gas price relief may be near

COEUR d'ALENE — Larry Smith admits he's a little "edgy" at the pump these days.

The Rathdrum man said he wonders how high local gas prices will get now that they've risen to an average of $3.12 per gallon in Coeur d'Alene, 24 cents higher than a year ago at this time.

"Enough is enough," he said while filling up in Coeur d'Alene on Wednesday. "It's gotten to where I've limited running around. I just hope we've hit the ceiling."

Matthew Conde, AAA spokesman, said it's difficult to say whether prices have plateaued heading into summer. The local average is lower than the state's average of $3.18 but higher than the nation's number of $2.88.

"Friday's OPEC (Organization of the Petroleum Exporting Countries) meeting in Vienna and the potential for a busy Independence Day make it difficult to predict where Idaho’s gas prices will go in the next few weeks," Conde said.

The recent drop in oil prices hasn't translated to a decrease in gas prices.

"It’s worth noting that there is not a direct 1-to-1 relationship between oil price movement and gas price movement, in part because oil is converted into many more products, including heating oil, jet fuel and diesel," Conde said. "Oil prices are set by existing supply and demand, but also future projections, among other things."

In late May, oil prices reached $72.24 a barrel on the West Texas Intermediate benchmark — the high point for the year. They closed at $65.07 on Tuesday.

Friday’s OPEC meeting could signal a big change in oil prices, especially if the organization reduces its production cuts, Conde said.

"But, for now, we’re in a wait-and-see mode," he said.

There has been recent talk of Russia, Saudi Arabia and others relaxing their production cuts in the months leading up to the end of the OPEC agreement that was made more than a year ago, Conde said.

"That agreement largely eliminated a glut of oil that was keeping prices lower on the global level," he said.

"If Russia and Saudi Arabia make such a move, others may follow suit. If the market believes that there will be more available supply down the road, that will put downward pressure on prices."

Conde said strong demand for gas continues to deplete inventory levels across the country, with no signs of slowing down.

"This has applied some upward pressure on gas prices," he said of the recent increase.

While demand is high, retailers have little reason to drop their prices even if they could, Conde said.

"As long as there is no collusion, the refineries, wholesalers and retailers could possibly capture additional profits when products are in high demand," he said.

In the colder months and in times of less demand, gas prices tend to drop to stay competitive. Supply interruptions, changes in demand, international conflicts, natural disasters and other variables can affect prices.

The U.S. is producing 10.9 million barrels of oil per day, well above previous levels. There are 863 active oil rigs in the U.S. this week, up 116 from this time last year.

"Over the last few months, high demand has applied upward pressure on gas prices around the country," Conde said.

Idaho’s average price has held steady since June 1. The national average has dropped 7 cents during that time, Conde said.

"We’re enjoying a bit of a plateau at the moment," he said.