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Where gasoline's not so peachy
Georgia, Alabama and Florida still seeing price hikes as pump prices stabilize or fall elsewhere.
September 29, 2005: 4:09 PM EDT
By Chris Isidore, CNN/Money senior writer
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NEW YORK (CNN/Money) - Drivers in much of the Southeast -- and especially Georgia -- probably have a hard time believing reports of retreating or stable gasoline prices around the rest of the nation.

In Thursday's AAA daily gas price report, as prices fell in New York, California and Massachusetts, the average price of a gallon of regular unleaded in Georgia rose nearly 3 cents, with the price in the Atlanta area jumping nearly 5 cents.

The average prices in those markets -- $2.780 in Georgia, and $2.788 in Atlanta -- are still below the AAA national average of $2.815, which rose 0.4 cent from the day before.

Prices rose more than a penny a gallon on average in Florida and Alabama, according to AAA, and the average price was up about 2 cents in Louisiana and Mississippi, two states still struggling to recover from heavy damage done by Hurricane Katrina.

But while those states are seeing increases, about 80 percent of the states saw prices decline, stay steady, or rise by less than a penny. Arizona saw the average price fall nearly a full cent to $2.916, though that was still above the national average.

Some Georgia drivers are reporting their stations have raised prices 40 to 50 cents a gallon within the last week, although those kind of jumps could not be confirmed by AAA.

According to officials with AAA, the problem is a combination of supply disruptions still remaining from hurricanes Katrina and Rita, coupled with some unique market psychology in different metro areas.

Part of the run-up in Georgia gasoline prices is due to the fact that a state 15-cent a gallon gasoline tax that was suspended following Katrina is due to resume Saturday. Gregg Laskoski, spokesman for AAA Auto Club South, said that gas tax could be causing people to top off their tanks this week to avoid paying more tax, and that in turn can prompt stations to raise their prices.

"We think that's a fairly logical scenario," he said.

While some might call those price hikes "gouging," national AAA spokesman Geoff Sundstrom said it makes some sense for station owners to try to raise prices now to stop a run that could drain their pumps this week.

He said stations that run out of gas lose the customer that is now typically buying milk, soda or other items at the convenience store part of its operations. About 80 percent of the nation's gas stations now include those kinds of convenience stores, and those sales now are more crucial to a station's profits than the gas sales.

"A lot of guys make more money on selling beer, cigarettes, milk and eggs," he said. "They don't want to underprice the surrounding market and possibly run out of gasoline. That's the worst thing that can happen to most of them."

Panic buying?

But Sundstrom also said that a run up in gasoline prices in a metro area or even a neighborhood can cause panic buying, which in turn can drive up gas prices even more.

"It's fairly predictable that people will see higher prices and panic and start to buy gasoline. We discourage both panic pricing and panic buying of gasoline," he said.

Georgia has also seen more attention to supply disruptions than much of the rest of the nation. Last Friday, as Hurricane Rita bore down on the Gulf Coast and its oil facilities, Gov. Sonny Perdue asked schools in his state to close Monday and Tuesday this week as a hedge against possible fuel shortages.

"He was trying to be proactive to alleviate the situation we saw immediately after Katrina," said Laskoski, referring to gas lines and closed gas stations. "If he's closing schools for those few days, it was a message about the need to conserve. It also said gas wouldn't be available."

Georgia and much of the Southeast got hit particularly hard by supply shortages in late August and early September after Katrina.

The Alpharetta, Ga.-based Colonial Pipeline that usually pumps more than 100 million gallons of fuel products a day from refineries and storage facilities in Texas and Louisiana to Georgia, the Carolinas and New York was closed due to power outages along the Gulf Coast.

Gas at some Atlanta-area stations soared to nearly $6 a gallon when that happened.

Sundstrom said that while the pipeline is now operating normally, there are still distribution problems and limits on supplies to some gas station operators due to the storms, which have caused more than 10 percent of the nation's gasoline refinery capacity to be off line.

"The entire distribution channel has been upset and that's manifesting itself in a wider-than-normal disparity in prices from place to place," Sundstrom said. "Until we get back to normal, it's smart for consumers to shop for the best price they can find as long as they're not burning too much gas looking for savings."

For a look at home heating sticker shock that could hit much of the nation this winter, click here.

For a look at Fortune magazine's "5 myths about gas prices" click here.

For more news on this year's oil crunch, click here.  Top of page

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