NATION Gas prices may reach $2 a gallon in coming weeks

Gas supplies continue to fall, pushing prices up.
DALLAS MORNING NEWS
Could consumers nationwide soon be paying $2 a gallon at the gas pump?
The gasoline market was flirting with that possibility Thursday as futures prices rose to their highest level in five months and as the nation, particularly the West Coast, continued to buckle under low supplies.
The price of wholesale gasoline for September delivery soared 9.57 cents, or 9.5 percent, to $1.10 a gallon on the New York Mercantile Exchange after experiencing its biggest intraday spike since 1991.
Gasoline futures prices foretell the direction of retail prices in the months ahead. And the sentiment in recent weeks has been sour. Overall supplies sank to below-normal levels after the power outage in the East, the Midwest and parts of Canada shut down some refineries. Combined with pipeline breakdowns in the West, this cut off the flow.
Upward pressure
The issue has been worsened by the typically heavy gasoline demand in the summer, when people take to the road for vacation, and the political and economic uncertainties facing some of the world's major suppliers, including Iraq and Venezuela.
"The [gasoline] stock has been down for a while, so there's been an upward pressure, anyway. And the power outage did have an effect," said Mark Baxter, director of Southern Methodist University's Maguire Energy Institute, adding that the blackout took away about a half-day of production.
Retail prices rose 5.6 cents per gallon nationally to $1.63 from Aug. 11 to Monday, according to the Energy Information Administration's weekly survey. Prices in the Western states rose by 17.3 cents per gallon, it said.
Still rising
Analysts say the pressures of these constraints would continue in the near future, but resumption of normal operations at the affected refineries, an anticipated increase of supplies by the Organization of the Petroleum Exporting Countries and fall's arrival could level off pricing pressures by early to mid-September.
"We're in for a further rise -- two or three weeks," said Baxter, who anticipates that retail gasoline prices will rise an additional 5 to 10 cents a gallon before they stabilize, absent any other unforeseen disruption.
Gasoline reserves nationwide fell about 1.2 million barrels last week to 196.9 million. That marked the fifth consecutive weekly decline and a nine-month low, according to the U.S. Energy Department, Bloomberg News reported.
In California, prices are already above $2 per gallon, the highest level since April.
While other factors have been brewing for weeks, the Aug. 14 power outage in the East may have pushed gas prices to their current levels. Three refineries in Ohio and Michigan and some in Ontario were shut down, and not all are back to preblackout capacity, according to the Energy Department, Bloomberg reported.
West Coast
Meanwhile, some refineries in California and Washington also experienced technical problems. And a rupture caused a pipeline in Arizona that supplies about 30 percent of the gasoline used in Phoenix to shut down Aug. 8. It has not yet been returned to operation.
As Arizona leaned on California's already tight supply for help, the price increases on the West Coast have outpaced those in the rest of the nation.
But the pipeline between Tucson, Ariz., and Phoenix could open as early as this weekend, and this likely will generate additional supply in the state, adding to the increased supply elsewhere.