Saturday, May 20, 2000, 12:00 a.m. Pacific

Gas prices may hit $2 a gallon

by Seattle Times news services

Gasoline prices appear to be on the rise again, and with the summer driving season days away, analysts are warning that pump prices could hit $2 a gallon by late summer.

The rise in prices on futures markets and at gasoline pumps ends what had been a decline after OPEC agreed in March to increase output. The price increases reflect concern, analysts say, that gasoline supplies will be tight this summer. Some believe they will be tight enough to cause sharp price increases and spot shortages.

"We can expect a substantial increase in gas prices between now and July 4," said Bill Berman, a longtime petroleum-price watcher for the American Automobile Association. "And I think we're going to see gasoline stations closing early or perhaps not opening Sundays."

Crude oil, trading in the mid- to high-$20 range, topped $30 a barrel last week for the closely watched West Texas Intermediate grade. The price slipped 44 cents to $29.89 a barrel yesterday after the Environmental Protection Agency confirmed that it is permitting St. Louis to forgo summer-grade standards until June 5 in hopes of preventing a fuel shortage there.

Energy trader Rick Smid at commodities trading firm Fimat USA in New York says the reasons are caused in part by speculators, but he thinks pump prices will be a nickel above their current level by Memorial Day and up another nickel by July 4. Further increases are possible "if we maintain these levels of supply," he said.

Said Lewis Ropp of Frost Securities in Dallas: "It is a not-unrealistic possibility that we could see $2-a-gallon gas later in summer."

The average stood at $1.53 for all grades as of Monday, the U.S. Department of Energy reported.

Although the prospect of $2-a-gallon-gas strikes many Americans as outrageously expensive, people in many of the world's other wealthy countries are used to paying $4 to $5 a gallon.

But in the United States, where car ownership, annual mileage and gasoline consumption are 50 percent higher than in Europe, and where inexpensive gas comes close to being considered an inalienable right, prices at $2 a gallon seem unthinkable.

Current concerns about prices and supply are rooted in several factors: inventories of gasoline that are 8 percent below their level a year ago because refiners are reluctant to stockpile expensive product; strong demand amid a healthy national economy, with predictions of a busy summer vacation season; and the difficulties and high costs involved in meeting more stringent federal clean-air standards effective June 1 for summer-grade reformulated gasoline.

But federal energy officials and the American Petroleum Institute, a trade group, are more optimistic. "I don't think you'll have any shortages as long as you don't have price controls," said John Felmy, the institute's director of policy analysis and statistics. The group does not make price predictions.

Compiled from Newsday, the Los Angeles Times and The Associated Press.

http://www.seattletimes.com/news/nation-world/html98/fuel20_20000520.html

-- Martin Thompson (mthom1927@aol.com), May 20, 2000