Summer bummer: $4 a gallon?

WASHINGTON — The last time gasoline prices approached $3 a gallon nationwide, hurricanes had ripped apart the Gulf Coast oil infrastructure and world oil supplies were stressed.

Today, oil supplies aren't pinched, but rusty U.S. refineries aren't producing enough gasoline to meet demand. That's driving up pump prices ahead of summer's peak driving season, and some fear $4-a-gallon gas looms.

In Washington, where gas prices generally are among the highest in the nation, they are approaching an all-time high. Self-service regular unleaded gas averages $3.16 a gallon, said Janet Ray, spokeswoman for AAA-Washington. That's less than 2 cents below the state's record-high average, $3.174 a gallon, which was set last May 29.

"There's every indication that we'll set a new record, probably sometime this week," Ray said. "The question is, how much higher will they go?"

To be sure, experts disagree. Some think today's gasoline prices — a nationwide average of about $2.85 a gallon — are near their peak. Others warn that we haven't seen anything yet.

"I am in the camp that we will go higher, perhaps a lot higher. I think we are one disruption or problem away from $4-a-gallon gasoline," said Phil Flynn, a veteran oil analyst for Alaron Trading, a Chicago-based commodities-trading company.

Even if prices do spike this summer, it doesn't mean drivers will spend less time on the road.

Laurie Falter, an industry economist with the U.S. Energy Information Administration, an arm of the Energy Department, said rising prices may affect consumers' long-term decisions, such as what car to own and where to live, but not their day-to-day behavior.

"Most of people's trips are not things they can change in the short term," Falter said. "What are they going to say, ' ... I'm not going in to work anymore'?"

Take Everett resident Dan Whitmore. The lawyer commutes 60 miles a day to and from his office in Seattle, and that's not changing anytime soon.

But what has changed is his family's choice of cars. Last year, after gas prices rose past $3 a gallon during the summer, Whitmore and his wife bought a Honda Accord hybrid and a Volkswagen Beetle with a more efficient diesel engine.

The family's Ford Expedition gets 12 miles to the gallon.

"This usually sits in the garage," he said. "For every day, it's ridiculous."

Jason Stewart, who lives in Moses Lake and estimates he drives about 1,000 miles a week for work and recreation, said the rising prices this spring — Seattle-area gas prices are up 8.4 percent from this time last year — haven't prompted him to change.

"We're traveling more," he said. "You can't let it slow you down."

Industry experts, however, fear that oil production might be slowed down.

One potential disruption is a threatened union strike May 9 at four Belgian refineries. Collectively, they process almost 1 million barrels of oil daily. The United States increasingly depends on imported gasoline to make up the difference between the 8.7 million barrels per day produced in the United States and the 9.4 million that we consume.

"We need those barrels from Europe. Any dislocation out of Europe is going to cause problems," said Andrew Lebow, senior vice president of the energy division at Man Financial in New York.

Still, if the Belgium strike is averted and there are no more shutdowns at U.S. refineries, the worst prices may soon be over for motorists, Lebow said.

"We're creeping back up toward $3 [per gallon as a national average] ... but should there be no geopolitical, political or refinery upsets, I think that the peak for gasoline is in sight," he said. "However, because things are so tightly balanced, one major plant going down is going to have enormous impact on the price."

U.S. gasoline inventories are at a 20-year low. The latest statistics released Wednesday from the Energy Information Administration show gasoline inventories this week at 194 million barrels — less than 21 days' worth of national use. EIA described that number as "well below the lower end of the average range." During the same week last year, inventories stood at 208 million barrels.

The weekly statistical report also showed that the nation's refineries were operating at 87.8 percent of capacity, hampered by fires and other mechanical failures that have reduced the amount of domestically supplied gasoline.

The National Petrochemical and Refiners Association, the trade group for refiners, believes a shortage in skilled labor has added to gasoline-supply problems.

"I buy gasoline like everyone else and watched prices go up. ... I don't think you can overemphasize the change in the labor situation," said Jeff Hazle, technical director for the trade association in Washington, D.C. "Part of it is because there is still a great deal of craft labor, skilled labor, that is being taken up by reconstruction following the hurricanes [Katrina and Rita]. ... It's kind of thrown the industry for a bit of a loop."

In the aftermath of the 2005 hurricanes, U.S. refiners operated at above-normal levels and put off maintenance and repairs as they struggled to supply the nation. Now they're trying to catch up on repairs, and there aren't enough skilled workers to do both that and the annual production switchover to summer fuels. The net result is delays on both maintenance and switchovers.

For gasoline prices to drop, a lot of things must go right at the same time. Aging refineries must ramp up gasoline production with no further glitches, they must escape damage from hurricanes, gasoline imports must remain steady and crude-oil prices must be at or below already-high levels.

"When you look at the big picture," said Flynn of Alaron Trading, "the trends are very discouraging. We haven't seen a drop in [gasoline] supply like this since the early '90s, and it is happening at a time when the demand for gasoline seems like it is not going to retreat."

American motorists also shoulder some of the blame for the prices. Gasoline consumption grew 2.3 percent over the past month and 2.2 percent over the past year, according to EIA.

"The consumers need to understand that if they continue to drive the same as they always have — or even more, which is what has happened — it's going to put additional pressure on the supply system ... and it's going to put upward pressure on prices," Hazle said.

Seattle Times business reporters Drew DeSilver and Kirsten Orsini-Meinhard contributed to this story.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com. Kirsten Orsini-Meinhard: 206-464-2391 or kmeinhard@seattletimes.com