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3:41 AM Tue, Feb. 19th

AZ continues to have lowest gas prices

Redrawn map would have placed Kingman in with much of Navajo Nation

KINGMAN - The state of Arizona continues to belie its history of high gas prices, coming in dead last among U.S. states this week, just days before millions take to the roads for the Memorial Day holiday.

According to AAA's online Fuel Gauge Report, the average price for a gallon of regular unleaded in Arizona is just $2.136, nearly 20 cents below the current national average of $2.334 and almost a half-dollar below neighboring California, which currently tops the continental U.S. with an average gas price of $2.577.

Statewide, the gasoline distribution centers of Tucson and Phoenix currently enjoy even lower averages of $2.060 and $2.095 a gallon, respectively. In northern Arizona, gas prices continue their standard trend of hovering several cents above the state average, with Kingman's 25 stations averaging $2.220 a gallon and Lake Havasu City's 18 stations averaging $2.171 a gallon.

Flagstaff retains the highest gas prices in the state at $2.258 a gallon, while Bullhead City is inexplicably paying among the lowest - its eight stations currently average only $2.009 a gallon, according to AAA's Fuel Price Finder Web site.

The state's bottom-barrel prices have confounded AAA Arizona's Public Information Director Linda Gorman, who said the state typically averages among the upper half of states at this time of year, especially as the summer driving season approaches.

"We're been bottom for probably at least the last week or so, but it's kind of perplexing if you look at the numbers - we have six and a half million people, and we don't have any local refineries," Gorman said. "Typically, this is the time of year we would expect to see some of the higher end prices in the country, and we're typically on the higher end of that spectrum."

Gorman said one reason for the low prices may be because of a continuing lack of demand for oil and gas wrought by the economic recession. With wholesalers unable to sell as much gas to their traditional clients, like California, Gorman said many have looked to Arizona as a means of unloading excess supply.

"A lot of refineries are getting rid of their gasoline in Arizona," she said. "Californians aren't driving as much as they used to, their demand has slumped; if you look at the Gulf Coast, their demand has slumped, and they're sending their gas into Arizona."

With no refineries of its own, nearly all of Arizona's gasoline comes into the state from two pipelines. One flows into Tucson from the west coast refineries, and the other flows into Phoenix from the Gulf Coast region. But lately, Gorman said, wholesalers along the pipeline routes have begun refusing delivery of fuel they no longer have the demand for.

"Demand across the country's falling, so they're trying to shuffle gasoline across the country and trying to find out what parts of the country have the capacity to take the gasoline," Gorman said. "What it looks like is happening is some of those areas along the western and eastern pipelines are just not taking their deliveries as they should. Instead they're sending it on down to Arizona."

But despite the continued drop in demand, prices for oil and gas have continued to climb slowly, inexorably higher since they bottomed out in December. Even with the lowest prices in the nation, Arizona's average remains substantially higher than the $1.70 or so motorists paid the week of Dec. 1, 2008.

Gorman said the rise in gas prices is not the result of concerns over supply, as it was when prices set record highs last year. In fact, she said, gasoline reserves are at their highest levels in 10 years.

"Gasoline demand is down, and we have plenty of gasoline in supply," she said. "It has to do with what analysts think the market is doing, and therefore how the market should be reacting. It looks like right now they're looking at the market correcting itself, which is why oil prices are going back up."

In other words, Gorman said, market analysts are banking that the worst of the recession is over, and that the economy - and gasoline demand with it - will soon be on the rise once again.

"Unfortunately this sentiment is coming before any actual change has been seen in Americans' lives," she said. "They're still feeling the pain of the housing market, the pain of the job loss market, so they're not as optimistic as some of these oil analysts are. They're a bit ahead of the curve."

For now, at least, Gorman said gas prices will likely continue to rise slowly and steadily over the summer, peaking at around $2.50 a gallon at the height of the driving season. Whether or not Arizona will continue to retain the lowest prices in the nation, however, remains to be seen.

"This is new territory for us, we are typically never the lowest state in the union and never in the summer," she said. "It's really too soon to tell if that trend is going to prevail over the whole summer, or if things are going to change."