How high will summer gas prices go?

Barring a continued run-up in crude prices, analysts expect pump prices to stabilize for a while near current levels.

“Most of that damage has probably already been done,” said Tom Kloza, an analyst at the Oil Price Information Service. “The next cross-your-finger period will be August to November.”

That’s because, with supplies stretched so tight, a variety of factors could bring a late-summer spike in pump prices. A severe August heat wave and a surge in demand for electricity could bring power outages that force refiners to shut down. Refineries have been running flat out without maintenance, which increases the likelihood of a breakdown.

“This year we’ve been pretty lucky about refinery problems,” said Neil Gamson, an analyst with the Department of Energy.

Refiners will also have to begin switching over to making heating oil later this summer to build stockpiles for the winter. The price of diesel fuel, which is similar to heating oil, has surged this summer in part due to trader's concerns that both fuels may be in short supply this winter. Diesel sold for an average of $2.34 a gallon this week, up 64 cents from a year ago. The sooner refiners begin building up those winter stocks of heating oil, the less capacity there will be to continue making gasoline.

Storm clouds
And, as consumers learned last year, the current hurricane season presents the threat of short-term supply interruptions. Even the threat of a hurricane making landfall on the Texas/Louisiana coast can force the shutdown of refineries and shipping facilities that account for roughly half the crude oil imported into the U.S. Much of the roughly 1 million barrels a day of imported gasoline comes from refineries in South America and the Caribbean, traveling along shipping lanes that run through the highest concentrations of tropical storms.

Though the higher cost of gasoline has not yet cut demand, pump prices are beginning to pinch, especially for businesses like delivery companies and cab drivers that rely heavily on transportation fuels.

Washington, D.C. cab driver Akram Mohammen said he now pays $35 for a tank of gas, up from $15 a few months ago.

“We have to work every day,” he said. “We cannot stop just because the gas prices go up, so it gets paid out of pocket.”

Gasoline retailers, who typically earn just pennies per gallon on gasoline sales, have also been getting squeezed. In areas of heavy competition, gas stations have been trying to hold the line on price increases to keep customers coming back. But in states with minimum markup laws, gasoline retailers face heavy fines for cutting prices too far. State officials in Minnesota, where the law requires a minimum markup of 8 cents a gallon, recently charged a gasoline retailer with 160 violations of the law which carry a potential fine of $1.6 million.

Fuel filching rises
And with few transportation alternatives available to cash-strapped motorists, gasoline retailers are also reporting more cases of stealing. Gas station “drive offs” amounted to $237 million last year, up from $112 million in 2003, according to the National Association of Convenience Stores.

“This is the worst year I’ve seen,” said Linda Fulton, who has managed a filling station in Wake Village, Texas for the past nine years. “I’m $111 short this week, and it’s all from drive-offs. Normally, I wouldn’t lose this much in a month.”

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