Gasoline price in nation now averages $2.04

Forecast suggests high of $2.06 may be broken

U.S. links rise to tight oil supply

Gallon of regular in Md. sells for $1.99, AAA says

October 19, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Two-dollar gas is back nationwide.

And gas prices are hovering near that mark in Maryland after a month-long surge. The run-up, driven by a series of events, is unusual given that this is typically a season when gas prices fall after summer travel wanes.

People fueling up in Maryland over the weekend paid an average of $1.99 for a gallon of regular, according to a AAA Mid-Atlantic survey released yesterday. That's an increase of 16 cents in four weeks, propelled by spiraling costs for crude oil as energy markets react to tight supplies, production disruptions and the fear of more to come.

U.S. motorists paid an average of $2.04 a gallon yesterday, up 17 cents from a month ago, according to the U.S. Energy Department. An agency forecast suggests that prices may soon top the $2.06-a-gallon high set in May.

The last time gas prices passed $2 a gallon - setting a record - was five months ago as vacation season heated up.

"This is really unexpected," said Thorsten Fischer, who follows the energy markets for Economy.com of West Chester, Pa.

Prices usually drop steadily after Labor Day, but world events are conspiring to push prices up, economists said. Growing global demand for oil, the series of hurricanes that hit the Gulf of Mexico in August and September and instability in Iraq have increased pressure on existing supplies. Traders also were made jittery by last week's nationwide strike by unions in Nigeria, because it is Africa's largest exporter of crude oil.

Crude oil futures closed down $1.26 to $53.67 a barrel yesterday, after hitting a record-high $55.33 a barrel on the New York Mercantile Exchange.

Spot prices - one measure of wholesale crude costs - are up about $12 a barrel since Labor Day, said Jacob Bournazian, an economist with the Department of Energy's Energy Information Administration.

"There's little or no flexibility on the supply side to increase production ... and that means any actual or perceived event that can disrupt supply is going to have an exaggerated impact," he said.

The average price for regular gas dropped steadily during the summer after the record-setting May, according to U.S. Department of Energy numbers. Gasoline prices began rising again in the middle of last month.

"We're seeing strong price increases every week," Bournazian said. "Retailers are trying to gain ground and catch up with the [crude oil] price increases, which have already occurred. Prices will continue to rise through October because even if the crude oil market were to reverse itself tomorrow, the price impacts ... are still working their way through the distribution systems."

He expects additional increases of 5 cents to 10 cents a gallon to catch up with recent rises in crude oil prices.

Larry Jackson, who owns two gas stations in Howard County and operates a third in Columbia, feels the pressure bearing down. Prices for a gallon of regular ranged from $1.97 to $2.03 at his stations yesterday, after several weeks of increases.

"With the crude going up to over $55 a barrel, it's going to be hitting us," he said yesterday. "I'm sure it's going to be this way for a while."

For archived coverage of the fuel crisis, go to baltimoresun. com/gasprices.

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