Editor’s note: This is the first of a three-part series about rising gasoline prices.

Rising gas prices have Scott Anderson of Twin Lakes thinking twice about taking his annual ice fishing trip north this year.

“If it takes 200 gallons to go up there at 75 cents more per gallon of gas than last year, that’s another $150 more to go this year,” he said. “That’s a huge deal — a couple day’s cabin rent.”

In fact, rising gas prices have him thinking about the everyday driving he does, as well. It’s 18 miles round trip from his front door to Albert Lea. He doesn’t waste trips to town or do any Sunday driving anymore.

In the past month, gas prices at pumps across Freeborn County have climbed about 20 cents. Pump prices around Albert Lea have risen from $3.09 to $3.13 in the past week alone.

Reports nationwide show the trend will continue across the United States. USA Today reported recently that drivers could be paying as much as $3.75 per gallon of gas by spring. CNN Money has reported gas prices could reach $5 per gallon by the end of the year.

“We don’t project any decline in the near future, but the $4 to $5 per gallon I’d say is getting a bit carried away,” said Gail Weinholzer, director of public affairs for AAA Minnesota/Iowa. “Three dollars seems to be the new normal as we head into 2011.”

She said the cause of the increase in gas prices is directly tied to the increase in crude oil prices.

On Jan. 3, the price of crude oil rose past $92, the highest it’s been since 2008. On Jan. 19, the price per barrel was $90.86.

“If the suppliers are paying $90 per barrel, they’ve got to pass that onto the customers,” she said.

What determines prices at the pump?

According to Doug Tiffany, assistant extension professor of renewable energy with the University of Minnesota, the price of crude oil delivered to a regional refinery is the biggest factor in the price of gas at the pumps, followed by the sources of supply for that refinery.

The costs to process the crude oil to produce the mix of petroleum products that are demanded at that time of year in that area is another factor.

“The U.S. imports over 60 percent of its petroleum, so refineries on the coasts have immediate access to crude oil tankers from various parts of the world up to a point,” Tiffany said. “Refineries tend to get modified in order to accept crude oil from certain regions of the world.”

Tiffany said in Minnesota the majority of the crude oil refined comes from Alberta, Canada, with increasing shares represented by petroleum extracted from tar sands. To accept and work with this type of crude oil, he said, local refineries, like Flint Hills, have had to make substantial investments to process crude oil with specific chemical attributes. Before it can be put in the pipeline, special processing steps and expenditures are necessary for the crude oil delivered to regional refineries.

He said several other factors also come into play with prices at the pumps, including seasonal specifications enforced by the Environmental Protection Agency and transportation from suppliers to gas stations.

“In rural areas of the country, tanker trucks typically drive more miles and often deliver fewer gallons, which can raise distribution costs that will have to be paid by the customer,” Tiffany said.

Federal and state tax mandates play into gas prices and the variations of prices from state to state. According to the Tax Foundation’s website, as of January 2010, Minnesota’s gas tax ranked 20th in the nation at 27.2 cents. Iowa ranked 32nd in the nation at 22 cents. The highest gas tax in the nation was California with a 46.6 cent tax and the lowest gas tax in the nation was Wyoming with a 14 cent tax.

Foreign oil and other global factors

Because the U.S. imports most of its petroleum for liquid fuels, Tiffany said, U.S. fuel prices also depend on worldwide petroleum supplies and demand. Developing markets like China can play a pivotal role in this.

Even though U.S. use of liquid fuels declined in 2008 and 2009, China continued to use more petroleum despite the worldwide recession. When U.S. oil refineries reduced their capacities in 2008 and 2009, they were adjusting to wounded demand by U.S. consumers and businesses.

“The fact that the U.S. is consuming more petroleum is evidence of recovery in our economy,” Tiffany said. “However, the refiners will only expand refinery capacity very cautiously. At this time inventories of finished fuel are low, which can exaggerate price swings in gasoline and other petroleum-based fuels.”

Bob Knutson of Knutson Oil in Glenville added that commodities traders have also influenced the spike in fuel prices.

He said with interest rates low, traders are trying to make money for their clients in areas other than the stock market, so they’ll buy and sell commodities contracts in crude oil futures, moving billions of dollars a day and driving prices up. A futures contract is a contract between two parties to buy or sell a specified asset, such as crude oil, at a specified future date for a price agreed upon today.

He said an Alaskan pipeline shutting down two weeks ago may also come into play with rising fuel prices as supply shrinks.

Local pricing

Monroe Warren, manager at BP Korner Mart on the corner of Maple Hill Drive and Front Street in Albert Lea, said the biggest determination of his store’s price fluctuations occur as the cost of gasoline is increased by its supplier.

Warren said the prices at his store are determined by the owner, and the station changes gas prices at the pump when he gets that call from the owner to make that change. This happens as the market price of crude oil goes up and down.

“Some weeks we’re out there five, six or seven times changing the prices,” Warren said. “Other times we will go three to four weeks without any changes.”

Tami Mehus, co-manager at Ole’s Eastside Shell on East Main Street in Albert Lea, said the relationship between how much fuel they have in the ground and what price that fuel was purchased at from suppliers is a major factor in determining prices at her station. Gas prices are faxed to the store at 6 p.m., after the markets close.

Mehus said the store watches the other stations’ prices closely, as well, which also affects the price of gas per gallon.

“Everybody’s usually got the fuel at the same price, but you can’t go up because you don’t want to lose business,” she said. “There have been plenty of times we lost money because we were waiting for someone else to make that move first.”

On Jan. 21, the price of unleaded gasoline at Ole’s Eastside Shell station was $3.13 per gallon. That was the same as the price of unleaded at Kwik Trip on the corner of Garfield and East Main Street, Kwik Trip on the corner of South First Avenue and West Front Street, BP Korner Mart at the corner of Maple Hill Drive and Front Street and BP Korner Mart at the corner of First and Main Streets.

Warren said his station deliberately tries to stay the same price as Kwik Trip down the street.

“We don’t want to hurt them or them to hurt us by price gouging,” he said.

Monday: Read about the breakdown of how dollars per gallon are distributed.

Area gas prices on Friday
Gas prices per gallon for regular/unleaded blends at Albert Lea gas stations on Friday are listed below. These stations were chosen at random and do not include all stations in Albert Lea:
• Kwik Trip, 1210 E. Main St.: $3.13
• Kwik Trip, 906 W. Front St.: $3.13
• BP Korner Mart, 1311 W. Front St.: $3.13
• BP Korner Mart, 901 W. Main St.: $3.13
• SuperAmerica, 23087 State Highway 13: $3.09
• TA’s Travel Center, 820 Happy Trails Lane, off Interstate 35: $3.13
• Love’s Travel Stop, 2751 E. Main St., off Interstate 35: $3.13
• Hy-Vee Gas, 2708 Bridge Ave.: $3.13
• Nelson’s Shell, 116 Bridge Ave.: $3.13
• Ole’s Eastside Shell, 2222 E. Main St.: $3.13
• Freeborn County Co-op, 1820 Margaretha Ave.: $3.11
• Clark, 701 S. Broadway Ave.: $3.12