Government Says Average Gas Price Just Below Record High

sg.biz.yahoo.com Tuesday March 11, 6:53 AM By Andrew Dowell Dow Jones Newswires

NEW YORK -- U.S. pump prices climbed higher yet again in the week ended Monday, with gasoline just missing an all-time high and diesel setting a new record, according to the Energy Department's Energy Information Administration.

Gasoline prices gained in every region of the country, pushing the U.S. average price of retail gas up 2.6 cents to $1.712 a gallon, 48.9 cents above the year-ago average and just shy of the $1.713 record set in May. California prices led the way, with that state's average up 7.2 cents to $2.084, 63 cents higher than a year earlier.

The U.S. average price of diesel set a record for the fourth-straight week, climbing 1.8 cents to $1.771 a gallon. Diesel prices are now up 55.5 cents from a year ago and have risen 29.3 cents, or 20%, in the past eight weeks.

The EIA has said it expects U.S. retail gasoline prices to set an all-time high in spring and peak in April at $1.76 a gallon. Soaring prices have already prompted several politicians to ask questions about market manipulation, as well as raising concerns additional pressure is being put on U.S. consumers as the economy struggles to mount a sustained recovery.

Industry analysts say pump prices have been pushed up by costly crude oil, which has risen 56% in the past year to near 12-year highs on concerns about supply disruptions in the event of war with Iraq, reduced output from Venezuela due to a strike and inventories that are running near the bottom of what are considered sustainable levels.

Crude-oil costs account for about half of the pump price of a gallon of gasoline or diesel, the EIA noted.

The agency has also said high prices are likely to persist, as there isn't enough crude flowing through the system to enable inventories of petroleum products and the crude from which they are produced to recover simultaneously.

While gasoline prices are up throughout the country, California's consumers have seen the sharpest spikes, a result of hiccups in the state's transition to gas blended with ethanol. The low-evaporation blend required for summer use is particularly difficult to get right, as the higher volatility of ethanol has to be counteracted, analysts have said.

California's pump prices are easily the highest in the country, running at least 40 cents a gallon over other regions. Prices on the West Coast as a whole increased 6.1 cents on the week at $1.993 a gallon.

Prices in the politically sensitive Midwest region rose 2.6 cents to $1.690 a gallon. Attorneys general in Wisconsin, Illinois and Iowa asked the Federal Trade Commission Friday to look into whether market manipulation has played a role in the rising prices.

Gasoline was cheapest on the Gulf Coast, the heart of the country's refining industry, where the average gained 1.3 cents to $1.592 a gallon.

Diesel prices climbed in every region but the Gulf Coast, where they fell 0.3 cent to $1.697 a gallon. Prices were highest on the West Coast, where they shot up 8.1 cents to $1.886 a gallon.

-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@dowjones.com