Share this story
Close X
Switch to Desktop Site

Summer gasoline outlook: steady prices, ample supply

Summer travelers, steering their cars into service stations, can expect stable gasoline prices after one of the sharpest climbs on record.

Nor are they likely to experience any serious shortages of gas, even though inventories are down slightly from last year. One reason is that motorists continue to cut the amount of gas they buy.

About these ads

Oil companies are using a variety of tactics to cope with sluggish gas sales and lower profits. In bids to cut financing costs and attract more price-conscious drivers, the Atlantic Richfield Company dropped credit cards and Exxon Corporation is offering discounts to motorists who pay with cash rather than cards.

Meanwhile, Standard Oil Company (Indiana) is planning to roll out a credit card with a bevy of new features. And the Sun Oil Company is returning to that old standby, ''gift'' glasses, to lure drivers into its stations.

For drivers more interested in price than gifts, the news is mixed. After falling 20 cents a gallon from March 1981 to April 1982, gas prices have bumped up about 10 cents, to $1.296 a gallon on average, according to Dan Lundberg, publisher of Lundberg Letter, a Los Angeles-based trade journal.

Gas prices ''are on a plateau,'' Mr. Lundberg says. ''Any further reduction of supplies or production of gas could tilt the supply-demand balance to a higher price. But there is nothing in the offing to suggest that.''

His relatively optimistic forecast is echoed by the American Automobile Association. ''If there are more price rises (this summer), they will be smaller'' than the recent run-up, says W. Allan Wilbur, an AAA spokesman. An AAA survey made June 21-25 found that gas prices had climbed 8.1 cents since May 31, to an average of $1.314. It was the second-largest increase the association's holiday-related surveys have found.

Surprisingly, the recent climb in prices was not caused by consumers buying more gasoline. Rather it was triggered by gasoline distributors and other middlemen refilling bone-dry storage tanks as prices started to firm. They had drawn down inventories earlier in the year when prices fell.

''It is not people out there driving their Chevies around, it's people filling up storage tanks,'' says Jim Fair, a Standard Oil (Indiana, or Amoco) spokesman.

About these ads

Gasoline demand from drivers is expected to be down again in 1982, as it has been for the past three years. Demand in the first five months of 1982, as measured by gasoline supplied from primary storage, was down about 0.4 percent, according to the American Petroleum Institute (API). One reason is the greater number of more fuel-efficient cars.

Shell Oil Company estimates that, for the industry as a whole, gasoline demand in 1982 will be down about 1.7 percent.

Gasoline refiners are not expected to have trouble meeting demand, unless there is a major upheaval in the oil-producing countries of the Middle East. ''The industry should be able to meet anticipated US demand for motor gasoline, barring an unforeseen major international disruption,'' an Exxon spokesman says.

At the moment, a 31-day supply is on hand, as against a 38-day supply last year at the same time. ''Inventories are down but not dangerously so,'' says API spokesman Earl Ross. With tight inventories and refineries running at low levels , however, there have been some temporary spot shortages, industry observers say.

With gasoline sales below earlier levels, oil companies are looking for ways to trim costs and win business away from coopetitors. Great attention is being focused on the cost of providing credit, which runs from 6 to 9 cents a gallon.

Perhaps the boldest step was taken by Atlantic Richfield (Arco). On April 15 , it stopped accepting credit cards at its 7,000 US outlets and cut its prices to attract cost-conscious customers. ''We are pleased with the results and there have been no surprises,'' a spokesman says. He declined further comment pending release of a report on the program, due later this month.

No other major marketer has followed Arco's move. One reason is that dealers with a big service business get hurt when customers cannot charge repairs. ''Those Arco dealers in prime locations have done well increasing (gas sales) volume,'' says Victor Rasheed, executive director of the Service Station Dealers of America. ''But those in less ideal locations or with service bays, those guys have taken a beating.''

Nevertheless, data compiled by the Lundberg Letter indicate that Arco has not lost market share.

Although other companies have not dropped credit cards, they have taken steps to reduce the level of credit sales and thus cut their credit expenses. For example, in selected areas Exxon stations are offering a discount for cash purchases. At the same time, Exxon is charging dealers 3 percent of the value of credit card transactions they submit. Amoco is now offering cash discounts in 23 states.

While trying to cut their credit card costs, most oil companies do not want to do away with them entirely. A Shell spokesman notes: ''We are lookkng for credit card customers.'' And later this year Amoco is planning to launch a $20 -a-year ''Multicard,'' offering a variety of services in addition to letting people charge gas purchases.

Not all gasoline marketing innnovations are confined to plastic cards. Sun Company dealers in 23 states are passing out ''free'' glasses to drivers who fill up twice at the same station. ''We are trying to bring new business into retail outlets . . . and reward or reinforce wise buying decisions of current customers,'' says Sun spokesman Robert Dietshe.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.