Gas price decline may help harvesters

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World economy responsible for improved prices, state ag spokesman says

By Stephanie Hornback

The steep drop in gasoline prices was too late to help farmers during the growing season, but it could help during harvest, said David Harrison, LaRue County Extension agent for agriculture. It depends on when they last bought fuel.

“A lot of times they make large purchases at one time and don’t use it all,” Harrison said. If they bought a large amount of gasoline before prices fell and have not depleted their supply, the recent low rates are of little comfort.

Consumers who don’t buy gas in bulk are benefiting. Even gas station owners are breathing easier.

“Everybody thinks that the stores are the ones that make all the money off (expensive gas),” said Todd Morris, owner of Y Not Stop in Buffalo, BP in Hodgenville and 3T Food Mart in Cecilia. Such is not the case, he said.

“We actually lose money when it goes up,” Morris said. “We do a lot better when gas is down.”

The reason is credit card fees — often 3 percent — and the 10 percent margin per gallon of gasoline on the retail end. For example, a $4 gallon of gas costs service stations 40 cents because of the margin and 12 cents for the credit card company, should the customer pay with a credit card. A $1 gallon of gas, however, would cost just 10 cents for the margin and 3 cents for the credit card company.

“The only advantage to it going up is the credit card companies make more money and the gas companies make more money,” Morris said.

Danny Rock, co-owner of Rock & Rogers, echoed Morris’ sentiments.

“Both of us — buyers and sellers — are in the same boat. We’re aggravated that oil companies are making so much profit,” Rock said. “It seems like they’ve got a monopoly on their prices of oil.”

Rock also is irritated at the federal government for not regulating oil companies before the stock market crash stepped in and did it for them. The crash, Rock said, is why gas prices started to decrease.

“Gasoline futures is traded on the market and they started falling fast, just like the stock market started falling fast,” he said.

Prices will increase once stocks rebound, Rock said — and no one knows when that will be. It is an international matter, said Bill Clary, director of public relations for the Kentucky Department of Agriculture.

“Most economists say it’s because the world economy has slowed dramatically, which has reduced demand,” he said. “Less economic activity means less need for energy, less need for energy means less demand for oil, less demand for oil means oil prices fall, and so forth and so on.”

As for the fear that gas will skyrocket again now that the election is over, Clary said it has no basis. Prices may very well increase, but it has nothing to do with the election, he said.

“The basic downfall of all of these types of theories of collusion is that crude oil and gasoline are sold as commodities on openly traded markets, and if someone were going to try to manipulate the price to that extent, they would essentially have to corner the market, and I don’t know that there’s any institution or group of people that would have that kind of resources,” Clary said.

Rock and Morris said they have never experienced an increase in gas prices after an election. Nor has Laura Blair, communications director for Newcomb Oil, owner of Five Star food marts in New Haven and throughout central Kentucky.

“The demand is down, the supply is up, so prices are coming down,” she said. “That’s really the number one factor.”

Demand basically stays the same for Rock and Morris, however, regardless of the price.

“People still do what they’re going to do every day,” Morris said. “They still have to go to work and the grocery store.”