Gas rockets to new records

By: CHRIS BAGLEY - Staff Writer
Diesel shoots past $4, fueling broader inflation | Thursday, March 13, 2008 11:22 PM PDT ∞

Fuel prices hit record highs in North County and across the United States on Thursday, with diesel fuel's blitz past the $4 mark foreshadowing a cruel summer for consumers of everything from picture frames to breakfast cereal.

The average price of regular gasoline in the area surged 8 cents from last week, to $3.57, according to a weekly survey by the San Diego-based Utility Consumers' Action Network. Diesel fuel, which is used to transport most consumer goods to market, shot up a whopping 16 cents, to $4.07.

Diesel prices have rocketed even past the swiftly rising price of regular gas in the last year, driven by higher demand overseas and tougher air quality standards in California.

Both fuels have spiraled upward in cost since late January amid rising oil prices and an ever-weaker U.S. dollar. Light sweet crude for April delivery edged up 41 cents Thursday to close at a record $110.33, up from below $100 at the beginning of the year. Analysts blame the increase partly on weakness in the dollar, which traded at yet another low of $1.56 against the euro Thursday. Interest rate cuts further weaken the dollar, and analysts expect another one Tuesday at a meeting of the Federal Reserve.

Diesel prices have skyrocketed more than $1 in the last 12 months. That has clobbered the trucking industry, one company owner said.

"They're killing us," said Keith Hardin, who owns Escondido-based Hardin Trucking. "I'm sure a lot of people are going broke."

If diesel stays near $4 for the next few months, Hardin said, he'll have no choice but to raise his fuel surcharges ---- now in the 10 percent to 20 percent range ---- up to 30 percent, a level that would still leave his company less profitable than it was a year ago.

Charles Langley, a fuels analyst for the consumer group, said the extra increase in diesel fuel probably owes a lot to new state regulations that have permitted only ultralow-sulfur diesel since September 2006.

Diesel's greater popularity in fast-growing economies such as China and India may also be contributing to the disproportionate rise in its price, said Susanne Garfield, a spokeswoman for the California Energy Commission.

Michael Noel, a UC San Diego economist who studies drivers' responses to higher fuel prices, said businesses in trucking and other industries that rely on diesel have very little room to conserve further, a stark contrast to consumers who can sometimes car pool or cut back on weekend outings to Disneyland or the desert.

Noel said he expects the trucking industry to keep its profits fairly stable in the long run by passing most of the fuel costs on to their customers and ---- ultimately ---- to the people who buy bread, car wax, and most other items.

Consumer prices have risen by an average of 4.3 percent in the last year, according to the U.S. Bureau of Labor Statistics, an increase that overshadows smaller increases in most workers' wages. When food and energy prices are ignored, inflation has been running at about 2.5 percent.

Noel said many retail business will factor the higher transportation prices into a single, dramatic markup in April, May or June.

"Consumers get annoyed at all the nickel-and-dime stuff," he said.

The Associated Press contributed to this report. Contact staff writer Chris Bagley at 760-740-5444 or cbagley@nctimes.com.

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