Gas prices likely to fall through end of year in Iowa

Source: Written by William Petroski, Des Moines Register • Posted: Tuesday, November 5, 2013

Midwest refineries are running at high capacity and oil prices are weak.

Iowa gasoline prices, already well below $3 a gallon in some cities, could drop another dime to 15 cents, say petroleum industry analysts.

The other good news from experts: Gas prices will probably stay low through the Thanksgiving and Christmas travel season.

The statewide average in Iowa for ethanol-blended gasoline on Sunday was $2.98 a gallon, according to AAA’s Daily Fuel Gauge Report. In the Des Moines area, gas prices were $2.82 per gallon at several stations in Altoona. The average cost in Iowa for the same fuel a year ago was $3.27 per gallon.

“There is no indication we will see an increase. Right now oil prices are pretty weak. We expect that we will continue to see prices fade for the remainder of the year,” said Fred Rozell, retail pricing director for the Oil Price Information Service, which tracks the oil, natural gas and biofuels industries.

Gregg Laskoski, senior petroleum analyst for, noted that gasoline prices typically decline in the fall. That’s because the summer vacation season is over, which means people are driving less, and because winter-grade gasoline is cheaper to produce.

Another positive factor: The U.S. Department of Energy reports the nation’s oil refineries are operating at 87 percent of capacity, while Midwest refineries are operating at 94 percent, which is better than any other region of the country. Iowa gas prices are usually lower than the national average due to strong retail competition that reduces profit margins.

While it’s common for Iowa gasoline prices to bump up for Thanksgiving travel, that’s not necessarily an automatic this year, Laskoski said.

“It is very possible we will see gas prices remain flat for the holiday period, and we could even see them continue to decline incrementally,” Laskoski added.

Harold Hommes, marketing bureau chief for the Iowa Department of Agriculture and Land Stewardship, believes the growth of the electric car industry and continued use of ethanol and other biofuels could put long-term downward pressure on petroleum prices.

“That combination is putting a real diminishing demand out there for their product. They don’t make money unless they sell product,” Hommes said.

Iowa consumers will benefit from lower gas prices, particularly lower-income households that devote a larger share of their income to buying gasoline, said Creighton University economist Ernie Goss. Lower gas prices are also important here because many rural residents routinely drive long distances, he added.

“So this is definitely a big plus, and if the price comes down more it is an even bigger plus,” Goss said.

The U.S. Energy Department reported in February that U.S. households spent an average of $2,912 on gasoline last year, the most in four years.

But Iowa State University economist Peter Orazem said most Iowans simply make adjustments in their personal budgets when gas prices rise or drop, taking shorter or longer trips, and changing how they shop. This allows people to minimize the impact of price increases, he said.

Several Iowa motorists said that while they are happy to see cheaper gas prices, they aren’t planning to spend their extra cash on more trips or shopping.

“Whatever they charge, you gotta have it,” said Allen Durflinger, 42, of Ottumwa, who shrugged his shoulders when talking about gas prices. He was driving a truck on Interstate Highway 80 in Dallas County while hauling wrecked vehicles to a Fairfield auto parts business.

Charlie Bowman, 69, of Lenox in southwest Iowa, who was driving his elderly mother to the dentist in Des Moines, said he recalls when gasoline sold for 30 cents a gallon. When compared to new cars that sold for $3,000 years ago and an era of nickel candy bars, “gas is not out of line” at $3 per gallon when inflation is considered, he said.

The price drop comes as a host of changes are swirling in Iowa’s gasoline industry. This includes the September introduction of suboctane gasoline that must be mixed with premium gasoline or a 10 percent ethanol blend before being sold at the pump. That change has widened the price gap between ethanol-blended gas and more costly “clear” gasoline without ethanol.

In addition, eight gas stations in mostly rural communities have begun selling E15 gasoline — which has a 15 percent ethanol blend — and is offered at 5 cents to 15 cents per gallon less than other types of gasoline.

The Petroleum Marketers and Convenience Stores of Iowa, a trade association, is trying to eliminate confusion for customers over the varying brands of gasoline by producing thousands of stickers for gas pumps that read “Contains No Ethanol.”

“These stickers have been going out the door like hotcakes,” said Dawn Carlson, president of the Urbandale-based petroleum marketers group. “I get feedback from companies all across the state. They say their store clerks have customers coming in and they want to know which one doesn’t have ethanol. They are confused.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, an industry group, is skeptical about the level of confusion. But he said he expects use of ethanol-blended fuels to grow because of significantly lower retail prices. He added that 14 additional gas stations will soon sell E15 gasoline and others will likely join them.

AAA Minnesota-Iowa has issued a statement cautioning motorists to carefully read their owner’s manual or check with their vehicle’s manufacturer before pumping E15 gasoline into their fuel tanks. “Our concern with this new blend is lack of consumer education, product testing, approval by vehicle manufacturers, and inadequate pump labeling,” said AAA spokeswoman Gail Weinholzer. The Environmental Protection Agency last year officially approved the sale of E15 after receiving a waiver request from producers interested in expanding the use of corn-based ethanol, despite objections by auto manufacturers, she noted.

Shaw said his association believes Iowa motorists should have no problems using E15 gasoline in 2001 model year and newer passenger cars and trucks. “But if you are uncomfortable with E15, don’t buy it. It is not required,” he added.