Where gas already costs $4 a gallon
Motorists stopping in Needles, Calif., on the desert's edge, will see some of the nation's highest prices.
It is a dubious distinction: some of the highest gasoline prices in the nation.
In this sunbaked town, tourists stop to fill up for $3.99 a gallon, regular unleaded, at the Shell or Mobil station.
As he pumps his fuel, Buck Edmundson says, "You feel trapped, like there's not much choice," referring to the risk of crossing the 108-degree F. Mojave Desert without a full tank.
Many Americans may soon be empathizing with Mr. Edmundson. As they hit the roads for their summer vacations, the average price of a gallon of gasoline is $2.86 per gallon, according to GasPriceWatch.com - about 75 cents higher than last summer and 17 cents higher than last month. Though gas in Needles costs more than the average, this right-off-the-interstate spot is just the sort of place where travelers find themselves as they head for national parks or drive cross country. Indeed, tourists visiting Hawaii, Big Sur, or the Hamptons often pay more for fuel.
"It's sort of what the market will bear," says Mantil Williams of AAA in Washington, D.C.
How much consumers will have to pay is also a hot topic in Washington, where the Senate Commerce Committee held hearings Tuesday on gasoline prices and oil-company mergers. Congress is considering legislation that would precisely define price gouging.
The hearings also included bipartisan criticism of a recent report by the Federal Trade Commission, which found no collusion among the oil companies and no national signs of price gouging.
Still, the higher prices won't deter many Americans this weekend. An annual survey by AAA and the Travel Industry Association found that some 31.4 million will travel 50 miles or more from home for the holiday, up 0.7 percent over last year. However, this is the smallest increase in three years.
"Higher gasoline prices are affecting travel somewhat," says Mr. Williams. "But we have found historically that high gas prices don't prevent people from traveling."
Take Needles, which is on the Colorado River. Tourists visit the town to kayak, or they stop here on their way to Las Vegas.
All the traffic has attracted plenty of gasoline stations, ranging from Valero, an independent, to most of the major brands. Gasoline prices in the town range from $3.59 a gallon to $3.99 a gallon.
In California overall, the average price of unleaded is $3.26, down 7.5 cents from a week ago, according to the Energy Information Administration.
People working at gas stations in town say prices are higher because of the cost of trucking the gasoline in from Colton, about 200 miles away. They blame wholesalers who they say are making all the money. No one at the stations wanted to be quoted.
Some of this explanation makes sense to Jay McKeeman, government relations director of the California Independent Oil Marketers Association in Sacramento. "I would imagine there are probably a limited number of wholesalers who supply Needles. There's not much competition," he says.
The refiners doubt the finger should be pointed at them. Although Bob Slaughter, president of the National Petrochemical and Refiners Association in Washington, says he does not know the Needles situation exactly, he notes, "I used to work for Amoco, and a lot of the stations, some of them independent dealers, would run the price way up. You can't order them to take the price down."
The high gasoline prices in Needles might reflect the profit strategy of the owners of the stations, says Jeff Lenard of the National Association of Convenience Stores in Washington. Some gas stations barely make any money by selling gasoline, he says, instead relying on sales of sodas and sandwiches. Others, such as gas stations near airports, prefer to crank up their pump prices. "It's less likely that the traveler will buy a sandwich," he says.
He says a 2002 survey found 40 percent of drivers will switch stations to save just 3 cents a gallon.
However, many drivers tanking up in Needles are unaware they could save money by simply traveling about a mile across the border to Arizona, where gasoline can be purchased for $1 a gallon less. This is partly due to taxes: According to the American Petroleum Institute, Arizona's taxes are 22.7 cents per gallon lower.
In fact, local residents rarely buy their gas in Needles. The high prices, they say, are for the tourists.
But when you're about to run out of gas, there's no time for shopping around. Orlando Hernandez, a lighting technician for commercials and movies, says he had to pull in when he saw the gas needle on 'E.' "At $4 a gallon, it is what it is," says the driver of a Honda that gets 25 miles to the gallon. "We still pay less than the rest of the world."
Inge Blom, a Swede tanking up at $3.99 a gallon, has a similar perspective: "Gas is pretty cheap here. We pay about twice as much in Sweden."
However, after George Ash, a resident of Lake Charles, La., pays $3.99 for fuel, he says, "When gas is 50 cents or $1 above the state price, there is something else driving this."