Oil falls, gas rises

Raul Garcia's customers have been accusing him of gouging them since Friday, but he says there's little he can do but point them to a state hotline and invite them to report him.

Regular unleaded gasoline at Garcia's Fast Mart station, at the junction of Showers Road and westbound Expressway 83, soared well past the $5-per-gallon mark on Friday, just as Hurricane Ike threatened the Gulf Coast and the heart of the nation's oil production.

Garcia said he bought the gas  Friday at $5.11 a gallon and has little choice but to pass the cost on to his customers. He points the finger at his supplier, who sold him the fuel after wholesale gasoline jumped to $4.85 a gallon on fears that Ike would damage the nation's oil refineries.

But his supplier, Susser Petroleum Co., said Garcia is the victim of being a small business in an industry largely controlled by large chains.

Unbranded stations, such as the one Garcia owns, are subject to price increases that big oil companies don't pass on to branded stations like Valero and Exxon Mobil during times of crisis, Susser president Rocky Dewbre said. His company supplies fuel to branded and unbranded stations alike.

"That's the disadvantage to being unbranded," Dewbre said. "Suppliers have to pass through a real cost. Oil companies will hold the price down (for branded stations)."

Susser makes a profit of about 3 cents off each gallon sold, Dewbre said.

And while the price of oil dropped to below $100 per barrel Monday for the first time since April, the price of gasoline has continued to rise since Friday.

Nationwide, the average price for regular gasoline rose 1.2 cents Tuesday night to $3.85 a gallon, according to auto club AAA Texas.

The average price Tuesday for regular unleaded in the Rio Grande Valley was $3.62, based on The Monitor's Gas Watch, an unscientific daily survey of prices at area gas stations. That was only 2 cents higher than Friday's average but was up $1.02, or 39 percent, from the same date last year.

Hurricane Ike's effect on the oil industry was not as bad as predicted, but the storm did damage at least a dozen oil production platforms and drilling rigs and temporarily crippled 20 percent of the nation's oil refining capacity.

Most motorists, however, only noticed a slight price increase, because big oil companies did not pass along the cost to consumers at major gas stations.

For Garcia and other unbranded gas stations, the story was much different. But he said he's going to have to drop his price to $3.50 a gallon and take a $1.61 loss on every gallon sold to try to bring more people inside his store.

"Business is bad. The (sale of) gas obviously is bad," said Garcia, who has owned the station for eight years. "I might as well lower it and try to bring in my customers."

Politicians and consumers across the country have lobbed allegations of price gouging in the aftermath of Hurricane Ike. In Texas, Attorney General Gregg Abbot announced Tuesday that his office has received hundreds of phone calls concerning gouging. Most of those involve gas and lodging, according to a news release.

Under the Texas Deceptive Trade Practices Act, retailers are prohibited from charging exorbitant prices for necessities such as drinking water, food and gas when a disaster declaration is in effect — as it has been since before the storm.

"You try to make some noise to see somebody who will listen to it, but everybody is plugged in so tight," said state Rep. Kino Flores, D-Palmview, referring to the often cozy relationship between Texas politicians and oil companies. "There was absolutely no reason for them to release that fuel at $5.11."

Charles H. Bronson, Florida's agriculture and consumer services commissioner, subpoenaed 16 major oil companies, including Texas-based Valero Energy Corp, Exxon Mobil Corp. and ConocoPhillips, as part of a price-gouging investigation in that state, according to a news release.

Those same companies continue to hasten efforts to reopen refineries and drilling rigs shut down before the storm. Valero, North America's largest oil refiner, said problems with supplies of fresh water and industrial gases prevented the company from reopening its three refineries.

"At this time we do not have a timetable either for when startup would begin at any of the refineries or how long the startups would take," company spokesman Bill Day said in a news release.

High-priced gasoline is expected persist for a few more weeks, but officials said the price already might have peaked, considering the declining price for oil and the resumption of production at several Houston-area refineries.
"Best-case scenario: two to three weeks," Dewbre said.

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Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.