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Gas Prices Spike Consumer Confidence

Audio

Aired 3/1/11

San Diego residents are dealing with another big jump in fuel prices. The average price of a gallon of regular rose more than 10 cents over the weekend. Economists worry the gas price spike could have more than a passing impact.

Dave Hallak has a front row seat for the latest round of gas-price hikes. He's the owner of Emerald Oil in La Mesa, an independent gas station. Soaring prices on California's wholesale-gasoline market have forced Hallak to jack up the price at his pumps nearly every day.

A man pumps gas into his truck at a Flyer's gas station on February 25, 2011 in San Francisco, California.
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Above: A man pumps gas into his truck at a Flyer's gas station on February 25, 2011 in San Francisco, California.

"In three weeks we have not had a down day," said Hallak. "In three weeks we've had 2, 4, 5, 10, 6 (cents). Every day has been just up, up, up."

Hallak's profit margin is squeezed to just under 3 cents a gallon, but he needs to make about 12 cents to break even. It's depressing when he has to face his regular customers, said Hallak. Those customers say it's depressing when they have to face the pump.

"I'm not filling up because I don't have enough money to fill up my tank," said Sara Fierce, who drove a minivan up to the pumps.

"So I'm only gonna' put $20 in and that'll only last a couple of days. I only have one car right now and I have to take a lot of kids to school. And it's expensive. It adds up."

She was surprised how quickly the price has gone up, but Brian Grove has seen this before.

"Everything seems to work in cycles. I remember a couple of years ago when it was close to this. It is pretty scary to think of if it were to go up to $4 and maybe even higher, " said Grove.

Grove's sport utility vehicle is hardly new, and it only manages about 17 miles per gallon. Grove is already making tough choices and right now, that means spending less on food than he normally would.

"Thirty seconds and that was $25," said David Erickson. He smirked as he exchanged pleasantries with owner Dave Hallak. Erickson playfully thanked Hallak for raising prices enough to keep the lines short.

How long prices will stay high is unclear.

The Utility Consumers Action Network tracks prices at hundreds of local stations. The current price spike is not a supply and demand issue, according to UCAN's Charles Langley.

"Hopefully peace will break out in the Middle East. Everyone will hold hands and sing songs and gas prices will plunge, because there's no logical reason for the price to go up, other than fear about Middle East tensions," said Langley.

The price of gas hasn't been this high since 2008, when it peaked at $4.62 a gallon.

The jump in the price of fuel is putting a squeeze on consumers in San Diego. Residents are spending money at the pump that they would otherwise be spending elsewhere, said University of San Diego economist Alan Gin.

That shift is happening at a bad time.

"We still have weakness in terms of the economy," said Gin. "Growth is not very strong. And so the worry is that this will derail any sort of economic recovery that we have. I don't think it's going to happen unless these high prices are sustained for an extensive period.

If the prices don't come down, Emerald Oil's pumps may go dark, said owner Dave Hallak.

When prices soared after Hurricane Katrina ravaged the Gulf Coast, he closed for three days to protest what he considered unwarranted prices hikes. It also doesn't make sense to stay open if the station can't generate enough profit to pay the bills, said Hallak.

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