Experts see no sign of end to gasoline price increases

Across U.S., consumers feel pinch of supply, demand

Gasoline prices just keep going up

August 09, 2005|By Meredith Cohn | Meredith Cohn,SUN STAFF

The end of the summer travel season traditionally brings relief at the pump - but don't expect it this year.

"There seems to be no end in sight to high gasoline prices," said Ragina Averella, spokeswoman for AAA Mid-Atlantic.

The average price of a gallon of regular gasoline in the United States hit an all-time high, not adjusted for inflation, of almost $2.37 last week. Average gasoline prices rose almost 8 cents a gallon last week, the U.S. Energy Department reported yesterday, and are up nearly 50 cents since a year ago.

The wholesale price of a barrel of crude oil for September delivery closed up nearly 3 percent, at $63.94, yesterday on the New York Mercantile Exchange. That was also a record, although not when adjusted for inflation.

Squeezed between high worldwide demand and disruptions from terrorism threats, weather and refinery problems, gasoline prices continue to shoot higher. It costs about 25 percent more to fill up a vehicle than it did last year.

Motorists have felt half-dollar jumps in gas prices over a matter of months before - in 1999-2000 and 2002-2003. And adjusted for inflation, the record for gas prices remains about $80 a barrel and $3 a gallon, back in 1981. But that's not much solace to consumers now.

AAA Mid-Atlantic reported that the average price for a gallon of regular reached almost $2.40 yesterday in the Washington area. Baltimore averaged above $2.36. The cheapest gas in Maryland was in Salisbury on the Eastern Shore, where a gallon of regular averaged $2.22.

If there is a retreat this fall, it will likely be small and temporary, experts said. Then gasoline prices, as well as the prices of natural gas and home heating oil, are expected to shoot up as fuel is stockpiled for winter, the season of highest demand.

"Basically, we're toast this year," said Frederic H. Murphy, professor of management science at Temple University in Philadelphia and an energy expert. "When wholesale crude prices go up, we see it at the pump almost immediately. In the fall, crude prices are going to go up, go down or stay the same. In other words, no one knows. ...

"But they are probably more likely to go up because demands in the U.S. and China aren't coming down."

Government and industry experts said yesterday's jump in oil prices resulted from threats of terrorism at U.S. government buildings in Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries. The United States closed its embassy in the capital, Riyadh, and other diplomatic locations on the news. The buildings are expected to remain closed today.

The United States imports relatively little oil from Saudi Arabia, but threats on any part of the system pinch the global market in general, said Doug MacIntyre, a senior oil market analyst for the federal Energy Information Administration, part of the Energy Department.

MacIntyre said the embassy closing and other events produce a temporary blip. But the longer-lasting hurricane season and refinery problems have been causing more volatility in prices.

Last year, motorists saw no dip at the end of vacation season because of hurricanes that battered Florida and the Gulf of Mexico region. That could happen again this year, he said.

Further, with demand so high in the United States, and now China, supplies are barely keeping up with demand.

The world is producing about 85 million barrels of crude oil a day and using about 84 million barrels a day, a historically thin margin. That thin cushion has made retail prices much more sensitive to natural and man-made disruptions.

"There's almost no slack in the system for crude or for refineries, so any disruption at a refinery or in a pipeline is going to have a greater impact than usual on prices," MacIntyre said.

Rayola Dougher, manager of energy market issues for the American Petroleum Institute, an industry group, predicted that a variety of factors will affect prices in coming weeks.

Specifically, hurricanes that pummel the Gulf of Mexico, or even threaten the area, lead producers there to shut down. Worse, they can damage equipment or supply lines. Refinery outages resulting from mechanical problems and fires over the weekend in Texas and Pennsylvania didn't help, either.

Energy legislation signed by President Bush yesterday, which offers subsidies to energy producers and drivers of hybrid vehicles, will do nothing to alleviate gas prices at the pump in the short term.

AAA Mid-Atlantic recommends that consumers conserve fuel by running errands in one trip, accelerating gently, obeying the speed limit and keeping the gas cap on tightly. It urges drivers to maintain proper tire pressure and avoid idling.

The group offers a searchable database on its Web site that allows consumers to compare prices at 85,000 gas stations nationwide. Among the cheapest in Baltimore was the West Franklin Street Citgo.

Carla Osorio, manager of the franchise in the 1200 block of W. Franklin, said a gallon was now $2.38. She raises the prices as the oil company instructs each morning. And what's going to happen to the price there?

"I think it's going to keep going up," she said.

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