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Gas prices begin their annual climb earlier than ever; Analysts warn that the cost of fuel could break records by driving season

On July 17, 2008, Trent Edwards was the Bills' starting quarterback, Tom Golisano owned the Sabres and regular gasoline hit an all-time local high of $4.28 per gallon -- a trifecta of frustration for Western New Yorkers.

Today, Edwards and Golisano are long gone. But those wallet-busting gas prices are making a comeback.

The cost of a gallon of gasoline is beginning its annual climb earlier in the year than it ever has, and industry analysts are warning it could break records by the time we reach the key summer driving season.

"It's pretty rough. One word, I can sum it up: 'Ouch.' It's going to be a nasty year for gas prices," said Patrick DeHaan, senior petroleum analyst for GasBuddy.com.

The likely causes of this year's run-up in gas prices, which has become a presidential campaign issue, include long-standing concerns marked by a few new wrinkles.

They include tensions with Iran, growing demand from Asia and South America, refinery issues, speculation and natural disasters.

"This year, the price increases are really based on what's happening in the world oil market, the crude market," said Wally Smith, vice president of the AAA of Western and Central New York.

In the Buffalo Niagara region, the average cost of a gallon of regular is 49 cents higher than it was a year ago, according to the AAA Daily Fuel Gauge Report. That's money families are spending on gas instead of food, clothing or other needed items.

As the price at the pump continues its steady rise, expect ride-sharing, public transportation and fuel-efficient vehicles to become more popular -- as they did during previous price hikes.

But people here are reliant on their cars, and drivers tend to go back to their old, gas-gulping habits when prices go down again in the fall.

However, experts say we could see $4.50-per-gallon gas here -- and $5 per gallon in the most expensive cities in the country.

And those record prices could be a catalyst for real change in our national motor-vehicle network, easing the way for cars powered by electricity, natural gas or other alternatives.

"When you get to $4.50 a gallon, the math [on a hybrid car] works," said Tony Daily, general manager of the Towne Automotive Group. "At $3 a gallon, it doesn't."

On Friday, a gallon of regular gasoline in the Buffalo Niagara area was averaging $3.87, according to the AAA's report. The price had gone up 5 cents over the previous week, 21 cents over the previous month and 49 cents over the past year.

Compared with the same time in 2011, drivers in this area are paying an extra $7.35 to fill up a 15-gallon gas tank.

"It's an emotional thing to people, and they pay attention to every cent," Smith said.

The lowest price in Buffalo recorded by GasBuddy.com on Friday was $3.78 at the Valero station at West Chippewa Street and South Elmwood Avenue. The highest was $3.99 at the Mobil at Main Street and West Northrup Place.

Those aren't anywhere near the record from summer 2008. But experts say the problem for drivers is the price of gas is reaching levels that typically aren't hit until later in the spring.

"This is a strange time of year for things to be escalating," said Ralph Bombardiere, executive director of the New York State Association of Service Stations and Repair Shops.

The price for a gallon of gasoline is tied to the price of crude oil, from which it is produced, and oil prices rose past $109 per barrel in Friday's trading, according to the Associated Press.

>Worldwide demand

Prices have gone up in large part because gasoline is the end-product of a fragile and complex network that stretches from the oil fields to the pump at the station.

A key factor in the rise of the price of gasoline is the surging demand for gas globally.

Demand in this country, Western Europe and Japan has flat-lined in recent years, but it has soared in China, India, Brazil and other developing countries -- and that's only going to continue to increase, said Lawrence Southwick, a retired University at Buffalo economist.

"Oil is a world market," he said.

Another factor is the impact of tensions in the Middle East, where a good amount of the world's oil reserves are located. Last year, conflict in Libya drove higher gas prices; this year, concern over the West's deteriorating relationship with Iran is to blame.

"The oil companies and the traders have a field day. Whether [the threat]'s real or perceived, it doesn't matter. They use it as an excuse," Bombardiere said.

Then there are problems with the intricate system of extraction, refining and distribution that gets gasoline to the consumer.

When refineries are taken offline for maintenance, or damaged by fire or flooding, this puts a strain on the rest of this network, and just one more incident could prove disastrous.

Smith and other observers say speculators who bet on the improving global economy and the continued rise in the price of oil also are responsible for pushing the cost of gasoline ever higher.

While Southwick says speculation is not a factor in the rise of gas prices, Sen. Charles E. Schumer and other senators were concerned enough last spring to press the Federal Trade Commission to investigate.

The FTC announced it was launching its probe last July, but Schumer spokesman Matt House said last week that the investigation continues and no results have been released.

>Impact of taxes

In New York, of course, taxes are a big part of the price of a gallon of gas.

As of Jan. 1, New Yorkers were paying an average of 49 cents in taxes on each gallon of gas, ranking No. 1 out of the 50 states, according to the Tax Foundation.

New York ranks fourth in the nation in average price of gas, after Hawaii, California and Alaska, according to the AAA.

If trends continue to hold, analysts say gas prices could reach $4.25 per gallon nationally, or roughly $4.50 per gallon locally.

GasBuddy.com's DeHaan told The Buffalo News he's sticking with his prediction of gas prices reaching as high as $4.15 nationally by the Memorial Day weekend.

Cities where gas typically is priciest -- New York City, Los Angeles and Chicago, among others -- could see $5 per gallon gas this summer, he said.

Every one-cent rise in the price of gas costs the economy $1.4 billon, analysts estimate, according to the AP.

Swiftly rising gas prices prod the money-conscious among us to seek ways to cut back on fuel consumption.

The Greater Buffalo-Niagara Regional Transportation Council expects participation in its ride-sharing program to rise over the coming months, said Hal Morse, its executive director.

Ridership on the Metro Bus and Metro Rail systems typically starts to go up once a gallon of regular hits $3.75, according to the Niagara Frontier Transportation Authority.

Since Jan. 1, combined ridership is up 13 percent, though it's impossible to say how much of that is because of gas prices, the agency reported.

"You get around $4, people really start adjusting driving behaviors," the AAA's Smith said.

Alternative vehicles And prices at that level drive vehicle owners to consider replacing their gas guzzlers with something more fuel efficient.

Bombardiere bought a Smart car, but he's been leaving it in his garage because he doesn't like driving it. "Now, I'm dusting mine off," he said.

Towne Hyundai had half a dozen hybrid Hyundai Sonatas sitting around on its lot that were scooped up soon after predictions of $4.50 gas first broke this year, Daily said.

While more customers are coming in to look at hybrids and smaller, four-cylinder cars, most people who upgrade their vehicle end up trading in their sedan, SUV or truck for a newer, more-fuel-efficient version of the same model, Daily said.

"I don't think you would be wise to bet on huge demand for the [Chevrolet] Volt, or the Smart car," Southwick said, adding, "We like our big cars. It's our birthright."

The cost, limited battery life and sparse network of recharging stations all have been obstacles to the sale of true electric cars, such as the Nissan Leaf, experts said.

But batteries are improving and communities slowly are adding the infrastructure needed to make electric cars more efficient. The Buffalo Niagara Medical Campus, for example, late last year installed 21 charging stations that can be used for plug-in cars.

"Building out an infrastructure like that would certainly help Buffalo Niagara," Morse said. "We're looking out a decade or more."

A similar set of obstacles has so far stymied the widespread adoption of vehicles powered by compressed natural gas. Some communities are using natural gas to power buses and municipal vehicles, but the NFTA, for example, does not have any of these buses in its fleet.

"CNG may be up and coming," said DeHaan, but the auto manufacturers will have to fully embrace any fundamental changes in alternative-fuel technology.

Instead, experts are looking to smaller, easier-to-adapt responses to the rising gas prices.

The regional transportation council, for example, is continuing its efforts to synchronize the timing of traffic lights along corridors such as Clinton Street and Elmwood Avenue to limit the amount of gas wasted waiting at lights, Morse said.

"That's less stopping -- less gas used," he said.

And while $4.25 or $4.50 regular gas raises a driver's blood pressure, gas prices tend to decline in the fall and winter. When they do, drivers go back to their regular behavior.

After the last rise-and-fall cycle, Towne Automotive's Daily said, "People were running to the showroom to buy the biggest thing they could."

He added, with a chuckle, "I think it's the eternal optimism of the American public."

email: swatson@buffnews.com

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AVERAGE LOCAL GAS PRICES

NATIONAL

Friday $3.65
One week ago $3.53
One month ago $3.38
One year ago $3.23
Record (date) $4.11 ( 7/1 7/2 008)

*

NEW YORK STATE

Friday $3.91
One week ago $3.86
One month ago $3.70
One year ago $3.44
Record (date) $4.31 ( 7/9 /2008)

*

BUFFALO NIAGARA

Friday $3.87
One week ago $3.82
One month ago $3.66
One year ago $3.38
Record (date) $4.28 ( 7/1 7/2 008)

Source: AAA Daily Fuel Gauge Report