Gas Prices Could Hit $4 by Summer

Tri-state area business owners encourage tapping fuel reserves and restarting off-shore drilling as a means to curtail rising fuel costs.

Dan Kieler led the way around the flatbed truck and pointed to the gas meter. "Look at this, $200 for (around) 50 gallons," said Kieler, who appropriately is from Kieler, Wis.

He stopped at the BP station on Old Highway Road on Tuesday morning to fill up while hauling some equipment for Epic Construction. "I think they're higher than hell," said Kieler, of current fuel costs. "A few years ago, diesel was always cheaper than gas. I don't understand that."

Kieler, who is unemployed but occasionally hauls equipment for Epic, paid $3.79 per gallon for diesel fuel Tuesday. At most Dubuque stations, the ethanol blend was $3.37 per gallon.

Fuel prices have increased significantly in recent days, as unrest continues in the Middle East and northern Africa. The Lundberg Survey of fuel prices released this week found the average price of gasoline in the U.S. rose 33 cents in the past two weeks.

There's a 25 percent chance gas prices for regular unleaded will rise above $4 per gallon by the summer, the U.S. Energy Information Administration said Tuesday in a short-term energy outlook. This latest increase has sparked a fresh discussion about just how high prices will go and what the remedy should be.

Some tri-state-area business owners say the rising prices are a concern, but are not high enough to force them to raise the prices of their products. For now.

Tapping the reserves? Inside the BP station, cashier Katie Weydert said customers have been buzzing about political unrest in the Middle East, and whether President Barack Obama will open the nation's oil reserves. Obama is said to be considering tapping into the U.S. Strategic Petroleum Reserve following this most recent gas-price spike.

"Somebody said he better do a lot more than think about it," Weydert said of one recent customer.

Open up the reserves, but also restart offshore drilling, Kieler said. The Obama administration decided late last year to continue the ban on offshore drilling. The decision followed the BP oil spill over the spring and summer, which resulted in more than 200 million gallons of oil in the Gulf of Mexico. Kieler argues that the reserves should be tapped and oil used replaced with what is drilled offshore.

What about the risk, particularly following the massive oil spill? "What's the difference if it's a risk over there or if it's a risk over here? We're still all part of one world," Kieler said. "To me, it would be less risk where we can keep an eye on it."

'All kind of tied together'

Some tri-state-area business owners who make deliveries as part of their operations say current fuel prices are a concern, but they have not spiked enough to cause subsequent price increases.

"We would have to see a pretty drastic change before I'd increase my delivery prices," said Andy Parker, owner of Custom Futons.

Sue Butt, co-owner of Butt's Florist Inc., said the business has a routing system for deliveries they try to follow. "Sometimes you need to be a little more creative," she said.

Butt's Florist has two vehicles in its delivery fleet; a minivan and a larger van used for bigger jobs. "We almost have to have one that doesn't have the greatest gas mileage to get the job done," Butt said.

Like Butt, Parker has two delivery vehicles as part of his business and he incurs additional costs driving to pick up inventory in other eastern Iowa cities. Both business owners said they are feeling an impact on the supply side from rising fuel costs.

Butt said her shop is experiencing increased costs of flowers and containers, and Parker said prices have fluctuated considerably on his foam futon supplies, which are petroleum-based. "It's all kind of tied together," he said.

Rising costs do present some opportunities, Parker added, such as a chance to press vendors on getting the best rates possible and reinforcing the need to shop for the most competitive prices. "I'll do what I can to keep my prices what they are and try not to pass on increases to customers," he said.

While Butt believes inventory prices will continue to rise, she also encouraged people to stay calm. "Everybody has to move on and don't let it all bother you so much," she said.

Weydert noted things could be worse. "Somebody told me yesterday that in Britain they're paying $9 (per gallon)," she said. "I can't imagine that."