Shortages at the Gas Pump This Summer?

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Thursday April 6 10:56 AM ET

Shortages at the Gas Pump This Summer?

By Tom Doggett

WASHINGTON (Reuters) - While American gasoline prices will not be as high as expected earlier this year, American households are seen paying record prices to fuel up their cars this summer and could face local shortages, the U.S. government said on Thursday.

The EIA's new forecast means gasoline will average $1.46 a gallon during the six-month summer driving season, one cent higher than the 1981 record.

Higher fuel prices will cost a U.S. household, which typically logs about 12,000 miles from April through September, about 25 percent more than last year or about $160 to $170 in additional expenses, the EIA said.

The average U.S. pump price for unleaded gasoline is expected to peak at $1.52 a gallon this month, then steadily decline to $1.39 a gallon by September, according to the EIA, the Energy Department's statistical agency. Gasoline prices now average about $1.50 a gallon.

The new forecast by the Energy Information Administration came one week after the Organization of Petroleum Exporting Countries (OPEC) agreed to pump more oil to replenish world stocks and ease prices which had soared to a nine-year high.

Non-OPEC producers Mexico and Norway have also increased their output.

Just a month ago, the EIA had predicted dwindling world supplies would boost U.S. retail gasoline prices as high as $1.80 a gallon. That forecast and volatile price swings in the crude oil market unleashed the greatest Congressional ire toward OPEC since the Arab oil embargoes of the 1970s.

U.S. gasoline prices are a politically sensitive issue for lawmakers even though American fuel is much cheaper than in other industrialized nations.

The Clinton administration, which has pressed American oil refiners to push their production to the maximum, has also repeatedly urged oil companies to pass along cheaper oil prices to consumers as quickly as possible.

Some Shortages Possible

With gasoline inventories so low, new federal requirements for cleaner-burning, reformulated gasoline ``raise the risk of localized shortages,'' the EIA said.

Reformulated gasoline that meets the Environmental Protection Agency's stricter content specifications must be in place at distribution terminals by May 1 and at retail outlets by June 1. Reformulated gasoline accounts for about one-third of U.S. motor fuel sales.

The agency forecast that gasoline demand this summer will average a record 8.72 million barrels per day (bpd), up 1.5 percent from last year.

But even with record demand, growth in both gasoline demand and highway travel this summer will be well below averages seen over the last five years because fuel is more expensive, the EIA said.

With the continued strong economy and low unemployment, highway travel is expected to grow 1.2 percent this summer to an average daily rate for all vehicles of 7.7 billion miles, the agency said.

Gasoline production is projected to average 8.4 million bpd during the summer, up almost 190,000 bpd from last summer.

``U.S. refineries will have to increase output of gasoline this summer by more than the expected increase in gasoline demand because of the expected decline in available net (gasoline) imports or inventories,'' the EIA said.

As a result, the agency said refinery utilization rates for the summer should average 96.8 percent, up from 94.3 percent last year.

``Some of the increased (gasoline) production will undoubtedly have to come at the expense of other products, particularly distillate fuel, which may affect heating oil supplies this fall,'' the EIA warned.

The agency warned that unplanned refinery outages, which typically exert little pressure on gasoline prices, may disrupt the market more than usual.

``This summer, however, the low stock levels might result in larger-than-normal gasoline price fluctuations if domestic production capability falters,'' the EIA said.

http://dailynews.yahoo.com/htx/nm/20000406/bs/energy_gasoline_1.html



-- Carl Jenkins (Somewherepress@aol.com), April 06, 2000


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