U.S. gasoline nears record retail price

www.upi.com By Hil Anderson UPI Chief Energy Correspondent From the National Desk Published 3/10/2003 8:21 PM

LOS ANGELES, March 10 (UPI) -- The average price for a gallon of regular gasoline in the United States, with California leading the march, posted another significant gain last week and reached a near-record price of $1.712.

The increase of 2.6 cents announced Monday by the United States Energy Information Administration was a fraction of a cent under the all-time record retail average of $1.713 per gallon set in May 2001 when low inventories and increasing demand collided with higher world crude prices.

"Factors, such as the possibility of war in Iraq, and the on-going petroleum strike in Venezuela, still exist," said Carol Thorp, spokeswoman for AAA Texas.

A war in the Persian Gulf is considered a virtual certainty by oil traders, or at least enough of a possibility that they have been bidding up the price of crude in order to nail down supplies before fighting breaks out.

In addition, low gasoline inventories, refinery maintenance and reports of production problems in the United States have added to the bullish sentiment.

California had the highest average price, according to the EIA, at $2.084 per gallon, some 7 cents higher than last week's figure. The San Francisco area posted an average price of $2.15 per gallon while Los Angeles-area prices were around $2.06. One station in Sacramento was reported selling full-service premium for a dizzying $3.04 per gallon.

"It's outrageous," Sharon Wilson told Los Angeles television station KCBS as she filled up at an Orange County service station. "I think we are being taken advantage of, but I feel helpless."

California historically has had some of the highest gasoline prices in the nation because of its unique clean-burning formula that makes it virtually impossible to import fuel from outside the state during periods of shortages.

According to the California Energy Commission, gasoline production in California as of the end of February was running more than 12 percent below where it was a year ago. At the same time, supplies on hand were 11.3 percent below February of 2002 and 7.4 percent under the previous week.

Recent market reports have indicated that the tight supplies in California are due to both high crude prices and to reported difficulties in retooling the state's refineries to produce gasoline with ethanol, which will be phased into use statewide over the course of the year.

The EIA said Monday that its most recent analysis indicated that the United States would have enough ethanol in the near term to accommodate the rising demand for the corn-based oxygenate, but with very little margin for error. In addition, it was expected that with Connecticut and New York in the process of phasing out the oxygenate MTBE and replacing it with ethanol, some foreign refiners would no longer be able to supply extra gasoline to the East Coast.

"When MTBE is banned in New York and Connecticut, the RFG imports are likely to decline as some foreign suppliers will not be able to provide MTBE-free reformulated gasoline," the agency said. "The reduced ... imports would need to be made up by supply from the domestic refiners, likely from the Gulf Coast refineries and at additional costs."

In addition, the EIA cautioned, additional infrastructure was needed to accommodate the steady shift to ethanol in the United States.