From the archives: Gasoline price soar

This story was originally published in Newsday on May 4, 2001

A gasoline retailers group made official yesterday what most motorists know from their aching wallets: Prices are still going up.

Average prices for regular unleaded gasoline rose in the past two weeks by 14 cents a gallon in Nassau and 11 cents in Suffolk, according to the Long Island Gasoline Retailers Association, to $1.739 in both.

A similar comparison was not available for Queens, but the current average for regular unleaded is $1.779, the group said. For premium unleaded in Queens, the average is less than a nickel shy of $2, and prices of $2 and higher have begun appearing in the region, mostly for premium so far.

Although prices normally rise as warmer weather brings an increase in driving, they have climbed earlier this year, in part because of OPEC production cuts but primarily, according to experts, because of a shortage of refined product, especially the reformulated gasoline required in many regions by federal clean air laws.

There is some cause for optimism, experts say: Although still slightly below last year's levels, gasoline inventories have been increasing, and some experts think prices might not climb much higher this year than they are now.

"I think we've probably seen the high for now, and it may turn out to be the high for the whole summer," said Peter Beutel, president of Cameron Hanover Inc., an oil consulting firm in New Canaan, Conn.

In Queens and Nassau, this week's averages for regular unleaded are 15 cents a gallon above those at this time last year. In Suffolk, they are 16 cents higher.

Prices nationally are expected this summer to climb above last year's peak. U.S. Energy Secretary Spencer Abraham told a House subcommittee yesterday that the national price for gasoline could average between $1.60 and $1.70 per gallon, topping the record of $1.68 per gallon set last June. Local prices tend to be higher than the national average partly because of higher local taxes.

Abraham said U.S. refineries are running near capacity to meet consumer demand and that the unexpected shutdown of a refinery or pipeline could cause sharp spikes in prices. "We don't have a lot of excess [refining] capacity right now," he said.

As if to underscore his remarks, word of a breakdown at a refinery in Venezuela and the delayed restart of another in Louisiana sent gasoline futures prices soaring yesterday on the New York Mercantile Exchange. Futures are estimates of what price gasoline retailers and others will pay for future delivery of the product.

Earlier this week, the American Automobile Association urged the government to temporarily suspend requirements for cleaner "reformulated" gasoline if there are shortages. "The return of record- high prices has been induced by last year's increase in the price of crude oil, a lack of domestic investment in refining and distribution capacity, industry consolidation and policy decisions made over the years on how to meet desirable environmental objectives," the AAA said in a statement.

Some economists are concerned that rising gasoline prices, coming during an economic slowdown, could cause further erosion in consumer confidence and hurt the tourism industry, both of which could exacerbate the downturn.

But a slowing economy and rising prices also could reduce driving, especially pleasure trips, said Beutel, thus helping alleviate shortages and putting a lid on prices. "We really won't get a strong reading on gasoline demand until closer to Memorial Day," he said.

There is some anecdotal evidence of reduced driving. Andy Harris, who owns a Texaco station in Jericho, says his volume is down somewhat from last year. He says that although customers are less likely to fill their tanks, they don't seem to be coming back more often to refuel.

"I'm not seeing them more frequently," he said. "I just think they're being more conservative in how much they're driving."