Gasoline supplies likely to shrink, prices rise
By James R. Healey
USA TODAY 2/25/2004 11:02 PM Updated 2/25/2004 11:55 PM
Motorists face gasoline shortages as well as record prices the next few weeks because of the skintight U.S. refining and distribution network.
The vulnerability of that network, combined with low inventories of both gasoline and the crude oil from which it's made, have the government and energy experts increasingly nervous that some places in the USA will run out of gas temporarily. An accident that has disrupted shipping on the Mississippi River and in the Gulf of Mexico could trigger shortages this week.
"It looks like the big bulk terminals in Florida are going to run out in the next few days," Tom Kloza, analyst at the Oil Price Information Service, said Wednesday. Big gasoline suppliers were warning their customers of imminent Florida shortages and reduced allocations, he said. The Coast Guard said it had reopened some of the channel Wednesday, but a backlog of ships remained.
"The U.S. gasoline supply system is not 'just-in-time' delivery; it's 'a-minute-too-late' delivery," Kloza says. The river disruption "underscores how hand-to-mouth the supply system is. ... It's a preview of the kinds of things that can happen in spades" as demand rises in the spring and summer driving season.
Americans drive more as the weather warms, increasing demand to 9.5 million to 10 million barrels of gas a day in the summer, vs. 8.7 million now.
"Many signs (point) to a tight gasoline market this driving season," the U.S. Energy Information Administration said Wednesday.
Analysts are more blunt. "Expect major regional gasoline shortages," warns A.F. Alhajji, associate professor and energy economist at Ohio Northern University. When that happens, prices zoom as gasoline wholesalers compete for supplies, giving a regional shortage national impact. Alhajji is confident that "gasoline prices will increase nationwide as we approach the driving season, even in areas that have adequate supplies."
Average gasoline prices in California and Hawaii have topped $2 for a gallon of unleaded regular, and Nevada is close at $1.968, AAA said Wednesday. AAA said regular averaged $1.681 nationwide, up 7.9 cents the last month. That's 5.6 cents less than the record average of $1.737 reported last Aug. 30. EIA, using different data, lists the record as $1.747 last Aug. 25.
Gas would have to average $2.89 to surpass the inflation-adjusted record of $1.417 in 1981.
EIA's weekly report showed gasoline supplies down 1% last week from the previous week. Refining operations were slowed by problems, maintenance and disruptive changes necessary to produce lower-sulfur and summer-blend gas required by clean-air regulations.
Supply worries kicked up West Texas Intermediate crude oil $1.10 per barrel, to $35.68.