Gasoline price hits $3.50 in Richmond

The average price for self-serve regular gas has reached $3.50 in Richmond, with no immediate end of the price climb in sight.

"We have not seen the worst," AAA Mid-Atlantic's Martha M. Meade said in a statement Wednesday. "Pump prices tend to go up around Memorial Day as the summer demand driving season kicks off."

"I definitely can see $3.75 (a gallon gasoline)," said petroleum wholesaler and market analyst John C. Zehler Jr. of Mechanicsville. "It's going to be here."

Prices might break Virginia's record of $4.01 a gallon between Memorial Day and July Fourth, Meade said, though such prices likely would not hold for long.

Higher gas prices carry the seeds of their own destruction in the burden they place on consumers and the economy. "As we approach $4," Zehler said, "that's the magic number" for disrupting demand and pushing prices down again.

The average price for a gallon of self-serve regular gasoline in the state was $3.55 Wednesday, according to AAA, 3 cents below the national average of $3.58. Historically, the travel organization said, pump prices in Virginia lag behind the national average by 10 cents to 15 cents.

"There have only been two times in approximately a decade when the average gas price in Virginia has been even close to the national average, and those were due to extreme circumstances," Meade said.

The rising cost of crude oil is largely behind higher prices, said John Felmy, chief economist with the American Petroleum Institute, which represents the nation's oil and gas industry: "It has driven virtually all the rise in gasoline prices."

Oil prices rose Wednesday on the expectation that world supplies could be squeezed further because of the tensions with Iran over its nuclear development program.

Brent crude, a benchmark for foreign oil imported by U.S. refineries to make gasoline, added $1.24 to end the day at $122.90 per barrel in London. The U.S. benchmark, West Texas Intermediate crude, which has ample supplies in the Midwest, rose slightly, adding 3 cents to finish at $106.28 per barrel in New York.

Oil prices have soared this year as tensions grew between Iran and the West. Brent crude has jumped 14 percent since the start of 2012, and West Texas Intermediate has increased 7 percent.

The U.S. needs to develop more of its own oil and natural gas and allow more oil imports from energy-rich Canada, to knock down gasoline prices, Felmy said.

What petroleum refiners pay on the world market for crude, plus gasoline taxes, accounts for more than $3 — or about 84 percent — of what people are paying at the pump now, Felmy said.

The average gasoline prices across the nation, Felmy said, is about 40 cents a gallon higher than a year ago. That means American households are spending an average of about $27 more per month for gasoline than a year ago.

Virginia gas retailers face the same problem their customers do — but worse, said Michael J. O'Connor, president and CEO of the Virginia Petroleum Convenience and Grocery Association.

Buying a 7,500-gallon load of gasoline now costs convenience store operators $3,750 more than it did at Christmas, O'Connor said. "Who has that extra $3,750 in their bank account?"

"Some of these retailers will have no (profit) margin," Zehler said, as a result of the surging wholesale prices.

According to the American Public Transportation trade group, people who ride public transportation instead of driving would save an average of $826 this month, and $9,914 annually.

Those savings are based on the cost of commuting by public transportation compared with the cost of owning and driving a vehicle at current gasoline prices, and the national unreserved monthly parking rate.