$4 gasoline possible by Memorial Day, official believes

Having predicted stable gasoline prices a couple of months ago, Peter Krueger is not about to repeat that mistake.

The state executive of the Nevada Petroleum Marketers and Convenience Store Association has swung firmly into the pessimists' camp, based on what he has seen and on anecdotal reports from his members.

"I think it is highly probable that we will have $4 a gallon at the pump by Memorial Day," Krueger said.

AAA's Daily Fuel Gauge Report on Monday showed that the average price of regular gasoline has risen 12 percent in the past month to $3.46 in the Las Vegas area.

Gasbuddy.com, a website tracking gasoline prices for more than 125,000 gas stations in the United States and Canada, listed a sprinkling of service stations in the Los Angeles area that already have reached or crossed the $4 mark, but nothing locally higher than $3.59.

Despite the rapid run-up in crude oil prices since Libya descended into chaos in mid-February, Stephen Brown, director of the University of Nevada, Las Vegas Center for Business and Economic Research, expects pump prices locally to crest around $3.65 in the next few months. His reading of the oil industry fundamentals, the focus of his work for three decades, leads him to think the fear factor haunting the markets could abate.

"I think if there proves to be no supply disruption from Libya, then oil prices are too high and should come back down," Brown said.

The trend of pump prices sinking more slowly than they rise could mean it will take weeks for any benefit to appear.

Already, drivers are feeling the pinch.

"Oh my God, the prices are high and there is no excuse in the world," Griselda Garibay said as she pumped $51 of regular into her father's Ford Expedition. "We are already making changes in our household budget because of it."

Alan Gilford, who owns a couple of Dairy Queen franchises in Las Vegas, has seen gasoline prices bruise his business.

"All my suppliers are coming in with fuel surcharges," he said as he filled his truck at the Costco on Martin Luther King Boulevard. "Most people think they just feel it at the pump, but everybody will see it at the food stores and restaurants."

The Nissan Titan truck Gilford uses for work drank $64 for a fill-up. Though he would like a smaller truck, the Nissan is paid for, he said. By his calculation, the operating savings he would reap by trading it in for something more fuel-efficient would be eaten up by loan payments on a new truck.

While stopping at Costco on his way to a reunion in Mesquite, Richard Reinke of Fresno, Calif., embodied both the good and the bad news for the all-important visitor industry.

"If I'm going to go somewhere, I'm going to do it," he said. "You can't just stay home and be a hermit. But with these prices, I probably won't be going places as much."

Patrick DeHaan, senior petroleum analyst for Gasbuddy.com, considers $4 a gallon not a matter of if, but when, as the current forces driving up crude oil meld with the typical market forces that drive up prices during the summer driving season. His best-case projections call for $4 a gallon prices by Memorial Day, but possibly earlier if the political situation in the Middle East deteriorates.

While shying away from specific targets, American Petroleum Institute senior economic adviser Rayola Dougher laid out a case for the worst not happening. Even as global economies recover and drive up demand, she said, the world has 5 million to 6 million barrels a day of spare pumping capacity while U.S. inventories are at five-year highs.

By her calculation, oil would have to hit about $126 a barrel to drive Nevada prices to $4 a gallon, and $168 a barrel to support the $5 a gallon that some industry observers say it will hit this year. As of Monday, the price of a barrel was about $97.

Even if Libya's 1.6 million barrels a day disappeared, she said, the surplus production could absorb it, especially if the Saudis step in to make up the difference.

That would come none too soon for the visitor industry. With the AAA showing regular gasoline in the Los Angeles area averaging $3.77 a gallon on Monday, up 12.5 percent in the past month, Brown said the risk has begun to rise that pump prices will dampen demand for leisure travel in Las Vegas' largest market.

All of the experts agree that the situation is the most volatile it has been in years, with the outcome hinging on the direction political forces might follow.

Should unrest appear in the eastern provinces of Saudi Arabia, the home of the oil fields, "Then all bets are off," Dougher said.

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.