TOPICS > Economy

Pain at the Pump

May 4, 2004 at 12:00 AM EDT


ELIZABETH BRACKETT: The numbers keep rolling in this Chicago gas station, and customers continue to be angry about where they stop.

CUSTOMER: Look at this. You get eight gallons for $20. That’s ridiculous, ridiculous.

ELIZABETH BRACKETT: Chicago has some of the highest gas prices in the country. In April, regular gas sold for $1.95 a gallon.

MICHELLE HULL: I think they’re ridiculous, totally ridiculous. It’s not even worth driving anymore, really. If you take public transportation, you’re better off.

ELIZABETH BRACKETT: While motorists have some other options, those who earn their living behind the wheel are taking a very hard hit. By law, taxi drivers in Chicago cannot raise their rates when expenses go up.

SALEH CHAWLI, Taxi Driver: We are not making no money. We’re making money, but almost $40 a day for gas. That’s too much.

ELIZABETH BRACKETT: How much more do you have to drive to make money?

SALEH CHAWLI: We have to drive about three or four hours extra, just to try to cover the cost.

ELIZABETH BRACKETT: Most trucks use diesel fuel, which has also hit new highs in the past month. Owner/operators like George Holiday are hurt since gasoline costs come right out of their pockets.

GEORGE HOLIDAY, Truck Driver: When I go to the pump, it ain’t like I’m buying ten gallons. I have to buy 220.

ELIZABETH BRACKETT: Wow. What does it cost to fill up?

GEORGE HOLIDAY: Cost me to fill up? Well, you’re looking at almost $400.

WOMAN: Will we have a liftoff later today? Okay.

ELIZABETH BRACKETT: Fuel costs at spirit, a local and over-the- road trucking company, have gone up 32 percent in the last two years. The company has survived by passing the costs on to customers.

CAROLYN SVOBODA, Manager, Spirit Trucking: You know, one thing we do is tack on a fuel surcharge to our rates. That’s something that even our own vendors do to us. Even the guy who delivers water, there’s a fuel surcharge there. So we do that. We monitor the cost of the fuel, and then we can adjust that surcharge up or down as need be.

ELIZABETH BRACKETT: Airlines have tacked on fuel surcharges to ticket prices, but are still getting nailed by high fuel prices. The cost of filling up a 757 jet: $11,000. At today’s prices, the jets burn fuel at $1,500 to $1,600 an hour. United Airlines is already $450 million over budget forecasts for fuel this year. The airline is in so much trouble because it has not been able to hedge its fuel costs by locking in lower fuel prices, because it is in bankruptcy. Robert Sturtz buys fuel for the airline.

ROBERT STURTZ: We do have a fuel strategy that helps us reduce the overall cost of fuel, but there’s very little we can do in terms of changing the commodity price. You know, jet fuel is produced from crude oil, and crude oil is now selling at 13-year highs, almost contract highs, and the jet fuel price is also selling at contract highs.

ELIZABETH BRACKETT: High crude prices are one of three key reasons for the 45-cent-a-gallon increase in gasoline over the last five months, says economist Richard Kosobud.

RICHARD KOSOBUD: If I were attributing percentage shares to the blame, I’d say you can add 10 to 15 cents of that 45 cents or so to demand. We’re just driving things like that. We’re driving these big cars. I’d add 20 cents or so, maybe almost 25 cents, to OPEC’s machinations. This is a cartel that’s going to give us a lot of problems in the future. And I’d a nickel or dime to this refinery problem.

ELIZABETH BRACKETT: The refinery problem limits supply. No new refineries have been built in the U.S. in the last 30 years. Existing refineries have had to pour millions into reconfiguring facilities to meet clean air standards. The president of the Illinois Petroleum Council says federal and state requirements have kept supply low.

DAVID SYKUTA: We have a very complicated fuel program mandated by the Clean Air Act, where we have to sell, for example, just here, between Chicago and St. Louis, 12 different kinds of gasoline. When things inevitably break, as they do, it’s almost guaranteed anymore that you won’t have a small problem, because Chicago gas is different from Detroit gas, different from St. Louis, and we’ve lost a lot of the flexibility in our industry to respond to emergencies and to crises.

ELIZABETH BRACKETT: Short supply has driven up prices, but not enough to reduce demand, says Kosobud.

RICHARD KOSOBUD: We find that prices have to go up higher than they are presently before people say, “I’m not going to take that trip. I’m going to buy a more fuel- efficient car.” So we’re sort of wedded to the car, we’re wedded to the truck, and we have trouble adjusting unless prices go much higher.

ELIZABETH BRACKETT: Americans complain bitterly about high gas prices now, but SUV’s accounted for a record 28.5 percent of all new vehicle sales the first two months of this year. And all those big gas tanks with low gas mileage push the demand for gas.

ELIZABETH BRACKETT: How high would gas prices have to go before you would think about switching from an SUV?

MARIA DURAND: I don’t think I would switch, honestly. It’s just the convenience.

ELIZABETH BRACKETT: Even for three dollars a gallon?

MARIA DURAND: Even for three dollars, I would not switch my truck.

ELIZABETH BRACKETT: Have you ever thought of trying another car?



KERRY HORIN: My husband and I are both… I’m 6’2″, he’s 6’5″, and we have a child, and we do a lot of traveling, and this car fits our needs.

ELIZABETH BRACKETT: While high demand and tight supply have meant big profits for oil companies, retailers have had a much tougher time. With gas prices this high, people think gas station owners must be doing really well. Is that the case?

JOHN MARKIN: There couldn’t be anything farther from the truth, actually. We’re all struggling. Our margins are very low, and the price keeps going up from our suppliers.

ELIZABETH BRACKETT: With smaller and smaller profit margins on gasoline, many station owners have added convenience stores. They can make enough of a profit selling fast food and coffee to offset the low profit margins on gas. Paul Torstrick of the Illinois Petroleum Marketers Association says traditional gas stations are in trouble.

PAUL TORSTRICK: They’re struggling, and they’re probably not going to survive. You’re going to have to have a large convenience store to survive in the future.

ELIZABETH BRACKETT: The question consumers and retailers are now asking: When will prices drop? With high crude prices, tight supply, and high demand, few see relief anytime soon.