Cautiously pumped up over low gasoline prices
If you’ve fueled up lately, you almost certainly noticed that gas prices are lower than they’ve been since “Bad Romance” was topping the charts at the end of 2009 — when the U.S. economy was in bad shape.
On Tuesday, gas in Glenwood Springs was going for around $2.80 a gallon, around 30 cents more than the state and national average, according to gasbuddy.com. Brent Crude, the primary international benchmark for oil prices, traded around $60 a barrel this week after peaking well above $100 in June.
Experts pin the reason for the sudden drop on OPEC’s decision this month not to cut production in the face of rising U.S. output and slumping demand in Europe and Japan.
The potential impacts are harder to pinpoint.
An oft-cited benefit to lower gas prices is an increase in travel and tourism, as well as the potential for locals to spend some of the money they’re saving.
However, since Glenwood Springs has seen a strong year in both sales tax and accommodations taxes even before gas prices dropped, it’s hard to say how much lower gas prices will help.
“We’re definitely on a roll in tourism,” said Lisa Langer of the Glenwood Springs Chamber Resort Association. “I think gas prices are just a nice bonus.”
“I don’t see how it could hurt, but I don’t know how to quantify it,” said Nancy Heard, general manager at Glenwood Caverns Adventure Park. “A few guests have made mention of it, and our web traffic from the Front Range has increased quite a bit.”
The Glenwood Hot Springs saw a 16 percent uptick in pool attendance in October compared with last year, but only a 1 percent increase in November, according to Jeremy Gilley, director of sales & revenue at the Hot Springs. In the end, it may be more weather-dependent.
The same goes for the ski industry.
“People who want to ski are going to go where the snow is,” noted Meaghan Lynch, PR coordinator for the Aspen Skiing Co.
There’s also the possibility that high gas prices actually encouraged Coloradans to vacation in state over the summer, observed Vicky Nash, spokeswoman for Resort Trends Inc.
Construction companies and other businesses that maintain a large fleet of vehicles are another possible beneficiary.
“It’s substantial. We spend seven figures a year on gas and diesel,” said Mark Gould of Gould Construction. “You see a 10 percent reduction in the price of gas and that makes a helluva difference.”
Shipping costs also drop with gas prices.
“Through the entire recession, we’ve seen an increase in the cost of our raw materials,” said Gould. “We don’t think we’ll see a lot of savings in 2015, but we don’t think we’ll see an increase, either.”
Even so, Gould said he’d rather see prices back above $70 a barrel.
“I’m really proud of energy production in the United States. It’s a big part of our economy. I would like to not have Saudi Arabia succeed in slowing that down.”
That’s certainly a possibility, according to Gregg Laskoski, senior petroleum analyst for Gas Buddy.
“Many oil companies and energy service contractors have seen significant declines in their respective valuations,” he wrote in an email to the Post Independent. “If crude oil prices decline further and/or remain below $70 or $80 for a prolonged period, many of the projects in development — i.e., new exploration, new drilling, shale oil and natural gas development — may be postponed or suspended.”
With so much of western Garfield County’s economy dependent on extractive industry, that could offset the economic gains from increased tourism.
IRONY AT THE PUMP
Ironically, the business most directly tied to gas prices may be the least affected by them. According to Alan Robinson, general manager of the Roaring Fork Co-Op in Carbondale, gas sales by volume were about the same for August through November as they were in 2013. Since the business gets by tacking on a flat mark-up per gallon, rather than a percentage, its profits are about the same, too.
The co-op gets its gas from Cenex, itself a cooperative, and tries to keep prices competitive.
“One of the things that really affects us is supply and demand,” Robinson said. “All of our crude comes out of Denver. Denver’s the end of the pipeline. If the supply is not there, a lot of times they’ll raise prices just to slow things down.”
That’s not the case right now.
“I don’t think we’ve seen the bottom, and I think it will rebound at some point,” he said.
Overall, most analysts seem to agree that the average Joe will see more benefits than detriments, at least in the short term.
“In terms of Colorado tourism, I’d have to believe that the improved cash flow for most Americans would likely offset the adverse impact that lower cost crude represents for those in the oil industry who may be changing or canceling vacation plans,” wrote Laskoski.
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