What fueled recent drop in gas prices?

On the Hot Seat

May 29, 2011|By Megan Woolhouse, Globe Staff

(Kayana Szymczak for The…)

Memorial Day weekend typically ushers in summer gas price increases along with the summer vacation season. Not so this year. Gas prices fell 15 cents last week, bringing the average for a gallon of unleaded to $3.85. Joseph Petrowski, chief executive of Framingham-based Cumberland Farms Gulf Oil Group, said he expects prices to fall further, dropping below $3.50 a gallon by July 4. Petrowski recently spoke with reporter Megan Woolhouse.

You predicted this week’s price drop two months ago. How?

I made the prediction that prices would drop when crude was about $112 a barrel. Some said it would go up to $130 or $140, and I said [on CNBC] that it would fall below $100 by Memorial Day. Goldman Sachs had put out a forecast that oil would go back up, and I said I didn’t see that. Six months ago, when oil was cheaper, I said we would go higher and we did. I’ve been right 100 percent of the time, but that’s just three predictions. I’m not going to quit my day job.

Why were you so confident about a decline in prices?

I would take the word confident out. It’s a reasoned prediction. At current prices, we’re seeing demand rationing of 4-5 percent. Usage is down year-on-year. Weather has also been a big component in demand destruction. We’re also seeing in Washington more of an appreciation of the need to address the supply issue. We’re seeing faster permitting on domestic drilling.

Do you see big changes in the kinds of fuel we use on the horizon?

I think we will see the advent of significant alternative fuels led by natural gas. I think that’s inevitable. It’s much cheaper. Today there’s about $1.50 a gallon spread, which means that it’s about $1.50 cheaper to buy compressed natural gas or liquid natural gas versus a gallon of petroleum. That’s an opportunity. What we lack is the infrastructure and the amount of vehicles.

You’re a proponent of alternative fuels, which seems strange for someone whose business is selling gas.

Gulf Oil is not a driller, nor do we refine. We are completely fuel agnostic. What we care about, since our assets are on the retail and distribution side, is that we have a low fuel price that’s not volatile, that is environmentally sound, and that our customers can afford. What the fuel is, I don’t care.

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