Price at pump in state tops $3; analysts clash on significance

Muhammas Rahman fills his gas tank Thursday at the Shell station at Broadway and Eighth Street in Little Rock.
Muhammas Rahman fills his gas tank Thursday at the Shell station at Broadway and Eighth Street in Little Rock.

— After flirting with $3 for all of 2011, the average price of regular gasoline in Arkansas has cleared that bar.

Statewide, the average price for a gallon of regular gas is $3.002, up from $2.971 a month ago, AAA reported Thursday.

Jim Williams, an energy economist who owns WTRG Economics near Russellville, says he thinks $3 is a “magic number” at which people start dwelling on prices more. Williams fears that if gas rises to $3.50, it could throw the economy back into recession or at least crimp the economic recovery.

“If you’re spending more on gasoline, that’s less to spend on consumer goods, and that’s less stuff to manufacture,” Williams said.

However, Phil Flynn, an analyst with PFG Best, a futures brokerage in Chicago, said he thinks of $4 as a level at which people nationwide really take notice, because it’s nearer to record highs.

“We’re not at a record high because we really do have a good supply of oil,” Flynn said. “That keeps the market well-grounded.”

AAA spokesman Mike Right said he didn’t expect $3 gas to spook Arkansans. Most people already have adjusted and become more fuel-efficient, he said.

Gasoline and crude oil prices are increasing mainly because of fears that recent uprisings in Tunisia and Egypt, as well as other parts of the Middle East and Africa, could spark unrest in a major oil-producing country and disrupt world supplies, according to some analysts.

Iran, the fourth-largest oil producer in the world, is among countries that have experienced protests.

Crude oil for March delivery rose $1.37 Thursday on the New York Mercantile Exchange, closing at $86.36 per barrel.

Recent U.S. snowstorms also have limited supplies by disrupting refinery operations, contributing to upticks in oil and gas prices.

Nationwide, the average for regular gas is $3.145 per gallon.

The highest price for regular in Arkansas was on July 17, 2008, when it hit $3.972.

A year ago, the average price for a gallon of regular in Arkansas was $2.472.

The rise in gas prices joins and contributes to several other inflationary trends, such as rising food and clothing prices. Even so, inflation has been relatively tame - the Consumer Price Index inched up 0.4 percent in January.

Considering events so far this year, Flynn said, he feels lucky that the nation isn’t grappling with $4 gas, although some cities such as San Francisco are nearing $3.60.

With “riots in Libya and uprisings in Iran, Bahrain, Tunisia ... it’s obvious why the risk in the oil [market] has gone up.” Gas prices typically fall at this time of year, Flynn said, because of weak demand. There are few holidays, and cold weather encourages people to stay home.

Rising prices have been tempered by new pipelines that deliver oil from Canada, Flynn said.

New production techniques allow Canada to produce and sell heavier oil than in the past, he added.

Arkansas gets most of its oil from refineries in Texas and Louisiana that are having to import crude at “world prices,” according to Williams.

He said that “down in the Gulf Coast, where all ofthe action is and where most of the gasoline in the U.S. is refined, they’re paying over $100 a barrel for crude, and that’s reflected in our gasoline prices.”

The average price of regular in the Little Rock-North Little Rock area was $2.976. In the Fayetteville-Springdale-Rogers area, regular was $3.012.

Front Section, Pages 1 on 02/18/2011

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