The Villages Daily Sun

THE VILLAGES — In the days after gasoline prices hit historic highs in Florida, Pete and Carol Burak considered two tough questions.

One was: Just how high do gas prices have to go before you alter your lifestyle in The Villages?

The other was: Why did prices peak at a historic average of about $3.10 a gallon for unleaded gasoline just a few weeks ago in Florida?

To the first question, the Buraks, Village of Santiago residents, have a simple answer.

When it comes to family, the couple may be willing pay a lot of money at the pump.

“It’s how much you love your daughter, son-in-law and grandchild in Omaha,” Peter said. “We recently went out there for family, and that’s something we have to do. So, I don’t know what the number is for that.

“If we’re talking about leisure, well, we’re Village people; so we use the golf cart every chance we get,” Peter added. “That’s why we appreciate all these stores with golf cart accessibility in The Villages.”

To the other question, however, Tom Mirabito Jr. has some answers.

Mirabito, a Villages homeowner, knows a bit about this subject, too. He’s an petroleum industry insider: The vice president of family-owned Mirabito Fuel Group, a diversified fuel distributor that operates about 60 gasoline convenience stores in upstate New York.

“Oil is a worldwide market,” said Mirabito, who lives in the Village of Springdale with his wife, Sharon. “Everyone is bidding on whatever oil is available. And as more countries become industrialized, there is more people competing for oil.”

This is particularly true now that industrial and consumer demand in China and India are chasing petroleum supplies.

“When you’ve got more people competing for the same product on a worldwide basis, the demand goes up,” Mirabito added. “When the supply stays the same, the prices go up.”

Crossing the threshold

It was September 2005 when gas prices first nudged past the consumer-dreaded threshold of $3 a gallon in Florida, peaking at an average of $3.01, federal Energy Information Administration data shows.

Average prices tumbled quickly over the following months in Florida only to regain momentum the next spring, peaking at $3 last August, the agency reported. Once again, prices dropped, falling to $2.18 by January this year.

By late April, the agency reported, prices again regained momentum in Florida, hitting the new historic average high of $3.10 on May 29.

Since then, however, prices have dropped steadily in the Villages area.

On June 7, for instance, the Circle K convenience store on County Road 466 sold a gallon of unleaded gasoline for $2.97. The price was 2 cents higher at the nearby Shell station.

On Friday, however, the price was $2.91 a gallon at the Circle K and $2.93 at the Shell station.

Throughout the most recent round of price increases, the Buraks never paid more than $2.95 a gallon. And they paid that price during their most recent visit to their children in Omaha.

And it appears the Buraks are among the few who avoided paying $3 or more a gallon.

“That’s because we have an electric golf cart,” Carol Burak said.

On the other hand, the Buraks’ good friend, Bob Knapp, paid as much as $3.21 a gallon.

Knapp, a Village of Mallory Square resident, drives vehicles that get just average mileage per gallon. He does wonder exactly how high the price must go before he would alter his Villages lifestyle.

“It’s a tough question,” Knapp said. “Whether it’s $6, $7, $8 a gallon, I don’t know. There is a point where you would have to decide. An electric golf cart might be an option.”

Supply-demand influences

Analysts attributed the recent round of price increases to various reasons.

Those reasons ranged from unforeseen problems at the nation’s refineries, to unsettled political conditions in the oil-rich Middle East countries, to disruptions from ocean-born storms.

“When there is a disruption, the refineries that make the product have to go to other markets,” Mirabito said. “They have to go on the worldwide market to get it, because their normal supply is disrupted. So they bid the price up.

“The seller is going to go with the people who offer the highest price,” Mirabito added. “So the price overall goes up. That’s what happens in the Gulf of Mexico with the hurricanes. They shut the refineries, so the price goes up.”

But this year, Mirabito said, an unexpected influence altered the supply-demand equation.

“In the U.S., the winter demand for gasoline did not go down,” Mirabito said. “The demand stayed at summer level.”

Then figure in the demand from China, India and elsewhere.

“Oil is a global product with global demand,” Mirabito said. “And we’re doing every thing in our power to make it more expensive, because we have higher demand and more stringent environmental requirements for the products we use.”

Part of the problem is that none of the oil companies have built a refinery since the late 1960s, Mirabito said.

“The refineries have done a remarkable job keeping up with demand, but they have to take them down for maintenance,” Mirabito said. “There’s a different kind of gasoline sold during the winter and the summer. So they have to shut down to retool.”

That might not be a problem if those refineries didn’t have to produce about 60 different blends of each kind of gasoline — unleaded, plus and premium — because of the different environmental regulations mandated by each state, Mirabito said. That’s one of the reasons why gasoline sells for such a high price.

“It used to be pretty simple,” Mirabito said. “You used to drive up to the gas pump, and it was the same gas all over the country.”

Short-term outlook

The short-term outlook for gasoline prices turned cloudy on Friday.

Commodities traders pushed the price for a barrel of crude oil to about $68.01. That’s about a 50-cent one-day increase.

“That’s not good news,” said Randy Bly, a spokesman for AAA Auto Club South. “To me, that’s going to bring a halt to our downward price trend very shortly.”

Even before Friday’s news, the federal Energy Information Administration predicted the downward trend might continue for just a few more weeks.

“While actual changes in supply-and-demand conditions can alter actual price levels from their projected summer path, EIA still expects prices to continue to decline over the next few weeks before possibly rising again toward the latter part of summer, based on current available evidence,” the agency reported.

Typically, Bly said, that traditional summer price increase happens around a busy travel time — the Fourth of July.

Then, Bly said, add in all the complications attributed to the refineries, Middle East tensions, particularly now in Lebanon, and concerns for a busy tropical storm season.

“Anything can happen week to week,” Bly said. “But all indications are the downward price trend may come to an end and possibly increase again.”

Even if prices increase, Bly doesn’t expect them to come anywhere near the next dreaded threshold — $4 a gallon.

“We don’t think that’s going to happen,” Bly said. “That’s barring any major problems in the U.S. or worldwide.”

David R. Corder is a reporter with the Daily Sun. He can be reached at 753-1119, ext. 9066, or at david.corder@thevillagesmedia.com.