Gas prices likely to stay high for driving season

John W. Schoen Senior Producer • Profile • E-mail

With the summer driving season just getting under way, gasoline stockpiles are running well below normal for this time of year and prices are setting new records weekly. And until supplies catch up with demand, it's looking like a long, hot summer of high gas prices — well above $3 a gallon in most parts of the country.

The latest numbers from the Energy Department pegged the average price of a gallon of regular gasoline at $3.218 — up 11.5 cents in a week and 32.6 cents higher than a year ago. Even adjusted for inflation, the highest price ever reached for gas was $3.22 a gallon in March 1981, just after the outbreak of the war between Iran and Iraq.

Those persistently high prices have sparked outrage among consumers, who have generated enough heat among lawmakers to win backing for a first-ever bill that would ban price gouging nationwide. The bill passed the House Wednesday, although it still has to pass the Senate, and the White House is threatening a veto.

Despite the record-high gas prices and the rhetoric on Capitol Hill, it's far from clear whether any price-gouging is happening, because supplies are unusually tight.

Refiners normally try to stockpile gasoline in the spring to get ready for the peak in demand as drivers hit the road for summer vacations and warm-weather industries like construction pick up steam.

But this year, with the summer driving season just getting under way, gasoline inventories are well below their five-year averages for the end of May. Inventories fell 15 percent between the beginning of February and the end of April — their biggest three-month drop on record, according to the Department of Energy.

Gas will hit $4 this summer — your thoughts?

The reason: Strong demand and high prices abroad cut into the flow imported gasoline. And a series of refinery outages — some of them scheduled maintenance and some the result of accidents, fires or other unplanned shutdowns — also severely crimped production.

And even as prices have zoomed past $3 a gallon, there has been no letup in demand. As of mid-May, demand was running 1 percent higher year-ago levels, according to the Energy Department.

In the past few weeks, refiners have begun to catch up, more capacity is expected to come online in coming weeks and inventories are slowly building. Imports have also begun to pick up. But with inventories at such low levels, it may be hard for supplies to catch up.

“With gasoline inventories likely to remain low all summer, retail prices are expected to remain close to $3 per gallon during the entire summer season,” the Energy Department said.

Some drivers — including those who tried to organize an unsuccessful “boycott” of gasoline retailers on May 15 — are crying foul, blaming refiners for deliberately reducing capacity to create tight supplies and drive up prices. Refiners say at these prices that just doesn’t make sense.

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