FUEL Nation's stations pump up gas prices

Prices are soaring as international supplies fall.
CHRISTIAN SCIENCE MONITOR
The nation's drivers are suffering from a high-octane case of sticker shock.
From Portland, Ore., where regular gas costs up to $2.09 a gallon, to Forestville, Md., where drivers are paying as much as $1.74 a gallon, consumers are getting drained in their wallets and socked in their tanks.
Nationally, gasoline prices are now 18 cents a gallon higher than they were a month ago, and 31 cents a gallon higher than at this time last year. A search on Gas Buddy.com found a Union 76 in Phoenix, posting unleaded at $3.79 a gallon in the wake of a ruptured pipeline. Holy SUV!
"This is like a consumption tax on consumers," says Fred Dixon of the brokerage house D.A. Davidson in Lake Oswego, Ore., where he recently paid $1.95 for a gallon of fuel. He suspects that fuel prices could even dampen retail sales this quarter.
The scope
Indeed, soaring prices affect almost all Americans, whose 240 million vehicles consume 5.8 billion gallons of fuel each week -- at an extra cost, given current fuel prices, of about $1 billion. If the price increases hold steady, figures Standard & amp; Poor's chief economist David Wyss, they'll nearly balance the tax cut, at about $60 billion this year.
The current gas spike comes as a surprise to many analysts. On Aug. 8, the Energy Information Administration wrote that gasoline prices would remain stable for the next two months and then decline. Now, Neil Gamson, an energy economist with the EIA, warns that higher prices may still be coming up.
"How much higher is hard to say because after Labor Day, demand starts falling off and imports could start to come in," he says.
But surprising as they are to some, there are lots of reasons for rising prices.
Tight supplies
Crude oil prices have stayed higher than expected, in part because it's taken longer to get Iraq back on line. In addition, about 300,000 to 400,000 barrels daily of Nigerian oil production are curtailed because of local political turmoil. At the same time, Venezuelan oil production has not returned to prestrike levels. And on top of everything else, OPEC has cut back on quotas, says John Felmy, chief economist at the American Petroleum Institute.
The tight supplies coincide with relatively low inventories. Last week, the API reported crude-oil stocks at 279.3 million barrels -- just barely above the level the government considers necessary for the operation of refineries. Gasoline inventories are also low, but home-heating oil levels are starting to rise as companies prepare for winter.
The tightening supply situation may be tied to an improving economy. Some economists believe the nation's gross domestic product is now rising as much as 41/2 to 5 percent annually -- double last quarter's rate. Felmy estimates that for every 1 percentage point increase in the GDP, there is a 0.4 percentage point increase in energy use.
On the road
Americans also appear to be driving more. The beginning of the summer was very wet in the East, curtailing some trips. But now, with a scorching August, people are traveling more, says Gamson.
And Americans are driving despite high fuel prices. In the Phoenix area, prices soared when a pipeline ruptured. This reduced the amount of gas flowing into Phoenix by 60,000 barrels per day -- over a third of the area's normal daily consumption.
The average price in Phoenix is now $2.10 a gallon, compared with $1.70 nationally.
To meet demand, refiners moved fuel from southern California. But this had a ripple effect up and down the West Coast, raising fuel prices in areas where gas was diverted. Gasoline now costs up to $2.10 a gallon in the San Diego area.