Refineries' gas supplies at all-time low

Brad Foss ASSOCIATED PRESS April 24th, 2001

Rising gasoline prices are taking a toll on Chicago cab driver Adam Kowski, who spends $26 a day at the pump.

“I am losing my money, my hair and my patience because of gas prices,” Kowski said. “It’s a taxi driver disaster.”

With the start of the peak driving season still more than a month away, the average price of gas is already up sharply. So is the frustration of many drivers, who wonder why the annual ritual of rising prices has begun so early.

Supplies of conventional gasoline are tighter for this time of year than they have been since the federal government began keeping track in 1963.

Motorists in California and in Midwestern cities will pay the most at the pump in coming months because of shortages of a blend of gasoline that produces less smog, which is required by the federal government during the summer.

The Southeast is somewhat buffered from price spikes thanks to fewer taxes and plenty of regional refineries, while consumers on the East Coast can expect moderate price increases.

The average price of gas, including all grades and taxes, is $1.66 a gallon, up 12 cents in the past two weeks, according to data released Monday by the Energy Information Administration, a division of the Department of Energy. A year ago, the average was $1.48 a gallon.

Analysts believe once the peak driving season arrives, the nationwide average could rise another 20 cents, with prices reaching $3 a gallon in parts of California and in cities such as Chicago and Milwaukee.

“Gasoline inventories in this country are at a level associated with the end of the driving season, not the beginning of it,” said John Kilduff of Fimat USA in New York.

During the winter, when gasoline inventories are typically replenished in anticipation of summer, major refiners focused instead on producing enough heating oil. Many refineries were shut down for maintenance that had been deferred while they produced heating oil.

The industry contends that the problem has also been created, in part, by environmental regulations that make it difficult to build refineries. No new refineries have been built in the United States for more than two decades.

Some analysts contend oil companies have made a bottom-line decision to postpone building new refineries to focus on drilling for oil and natural gas, which offers bigger profits.

“No doubt about it,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. “Their feeling is that ’we’re better off in the real core of this business, which is drilling.’ ”

Demand has gone up roughly 3 percent annually in recent years, pushed by a strong economy and the growing popularity of gas-guzzling sport-utility vehicles.

Adding to the price increases are laws requiring major cities to use cleaner-burning, but more expensive, reformulated gasoline in the summer months.

Reformulated gas is particularly scarce — and expensive — in Midwestern cities including Minneapolis, Chicago and Milwaukee, which are far removed from the country’s major refineries on the East Coast and in Texas.

So far, rising gas prices don’t appear to have quelled Americans’ appetites for SUVs.

U.S. consumers last year snapped up 3.5 million new SUVs, up 9.3 percent from the 3.2 million sold in 1999, according to Autodata Corp., a Woodcliff, N.J.-based automotive marketing consulting firm. SUVs last year accounted for one in every five new vehicles sold.

© 2001 Reno Gazette-Journal

http://www.rgj.com/cgi-bin/printstory.cgi?publish_date=20010424&story=988181481

-- Martin Thompson (mthom1927@aol.com), April 24, 2001