Gas prices on a steady rise

Fuel prices have risen steadily in recent months and Jeff Anderson, like other commuters, has taken notice.

Anderson commutes 45 miles from his home in Welch to the bank where he works in Rochester. He says he's well aware that rising fuel prices are pinching his family's pocket book.

"How much we plan for a monthly budget, if we have to pay more at the pump, that absolutely affects us," said the married father of two. "It's a huge factor."

According to AAA Minnesota, the average price for a gallon of gasoline is now 42 cents more than last year's average -- $2.95 compared to $2.53.

Gas prices in Red Wing on Friday morning ranged from $2.86 to $2.91 for regular unleaded gasoline and $3.33 for diesel.

Mike Wilson of Wilson Oil says he expects gas prices to continue to rise steadily throughout the winter.

"The market keeps creeping up," Wilson said.

He added a $3 gallon of gasoline might be in our future, although he doesn't expect there to be a dramatic hike at any point in the near term.

"Diesel is going to keep creeping up," too, he said.

The average price for a gallon of diesel in Minnesota is $3.39, up from $3.38 a week ago, according to AAA Minnesota. Diesel averaged $2.85 a gallon last year.

Anderson said he finds it frustrating not knowing the reason behind the rise in fuel prices.

"We don't understand what drives the cost -- why it goes up randomly," Anderson said.

This is a common feeling, says Douglas Tiffany, a research fellow in the Department of Applied Economics at the University of Minnesota.

"Sometimes it is surprising to consumers when they see the gasoline prices changing so rapidly at the pump," Tiffany said in a statement to the R-E. "But when you take a step back you should appreciate that the petroleum refining industry has had to make substantial adjustments to respond to lower demand as well as seasonal differences in the products they supply."

After the steep rise in fuel prices in the summer of 2008 -- where gasoline peaked at $4.10 per gallon -- consumers did what they could to cut back on fuel consumption.

This caused some companies to go out of business and others to shut down their less efficient refineries, Tiffany said, adding companies are now keeping smaller inventories of their petroleum products.

He said these factors have cut down on the overall supply of oil, which in time has led to an increased demand. Tiffany said there has been some resurgence of the U.S. economy that is also helping increase demand for oil.

Wilson said he sees numerous factors affecting fuel prices, including worldwide demand and the weak U.S. dollar, which is pushing more investors into the commodities market.

Anderson, meanwhile, says he's already taken steps to fend off rising fuel prices. This past spring he traded in his truck for a more fuel-efficient car.

It's a nice car, Anderson said, "But I'd still rather drive my pick-up."

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