Zen and the art of dealing with high gas prices

There was a definite consumer reaction in September 2005 after Hurricane Katrina outages pushed prices above $3 gasoline for the first time. Demand dropped as much as 6.5 percent. “There was ... something significant psychologically about the $3 barrier,” said Perner.

Since then, however, consumers seem to have adapted, with demand rising throughout a brief period of prices above $3 a gallon last summer.

“People complain about higher oil prices ... but they still drive their cars, they still buy their SUVs, they don’t want to carpool,” said Fadel Gheit, an energy analyst at Oppenheimer & Co.

“It’s a little inconvenient for me to take the bus,” said David Harris, 31, a film school marketing manager in Los Angeles who commutes 40 miles a day for work.

MSNBC video Gas prices continue to move higher May 15: Pump prices continue to move into record territory. MSNBC's Mika Brzezinski reports. MSNBC

Consumers may suspect that oil refiners are colluding in the recent price spike, but analysts say the real culprit is an unprecedented number of refinery accidents and maintenance outages this spring — combined with drivers’ rising demand for fuel. Most prominent of the outages was a February fire that shut down Valero Energy Corp.’s 170,000 barrel-per-day McKee refinery in Sunray, Texas, for months.

“If you just count incidents, there are more this year than there have been in previous years,” said Mike Conner, a specialist on refinery operations at the EIA.

As a result, gasoline inventories fell by more than half to 93.5 million barrels in the week ended May 4 from 205.1 million barrels in the same week in 2006 and 214.7 million barrels in 2005, according to government figures.

Charles Drevna, executive vice president of the National Petrochemical and Refiners’ Association, said many refineries shut down for maintenance for the first time since their operations were kicked into overdrive by Hurricane Katrina. When the 2005 storm knocked out gas and oil facilities along the Gulf Coast, refineries in other parts of the country had to step in and pick up the slack, Drevna said. In many cases, that meant putting off regular maintenance for years.

“There’s still a lasting effect from that,” Drevna said.

Also, he said, the process of turning crude oil into gasoline has become more complicated over the years, particularly as different governmental entities have mandated changes to the chemical makeup of gasoline for environmental reasons. It takes more equipment, more complicated processes and more oil to make gasoline now than it used to, Drevna said.

Drevna said refiners have been steadily expanding their existing facilities, adding the equivalent of one new refinery a year, on average, every year for more than a decade. That’s a cheaper and faster way to expand refinery capacity than going through the multiyeaer process of trying to win a permit to build new plants, he said.

While higher gas prices haven’t done much to cut demand, they also don’t appear to have had much effect on consumers’ car-buying behavior, according to Autodata Corp. Sales of light trucks and SUVs declined 3 percent in April, less than the 12 percent slump in car sales. Light trucks and SUVs continue still make up 53 percent of U.S. vehicle sales.

At a Chevron station in San Francisco that was charging $3.95 for a gallon of regular gasoline Nathan Sullins, 31, a computer programmer, gloated as he filled up his Toyota Prius hybrid for a fraction of what other drivers were paying.

“High gas prices are a bummer, but you reap what you sow,” he said. “If we had started making fuel-efficient cars 10 years ago, we wouldn’t be in this situation.”

William Hill, of Pittsburgh, said he’d consider downsizing from his minivan to a hybrid sedan if hybrids weren’t more expensive.

“They charge you more for a hybrid to compensate for what you would pay for gas,” Hill said while filling his minivan along the Pennsylvania Turnpike. “So either way, you lose.”

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