Gas prices nationwide hit record high

By Seattle Times staff and news services

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WASHINGTON — The retail price of gasoline hit an all-time high yesterday — nearly $1.74 per gallon nationwide — reflecting strong demand, tight supplies and the high cost of crude oil, AAA reported.

AAA, formerly the American Automobile Association, reported that motorists are now paying $1.738 per gallon for self-serve regular unleaded gasoline, one-tenth of a penny higher than the previous record set Aug. 30 of last year. Premium unleaded costs more than $2 a gallon in many parts of the country.

State AAA officials said Washington's average price for regular gas is more than seven cents higher than the national average at $1.81. The record for the state is $1.95 on Sept. 2, 2003.

Three states — California, Hawaii and Nevada — already have crossed the $2-a-gallon threshold for regular unleaded, AAA said.

The federal government has warned that gasoline prices could increase by an additional 30 cents to 40 cents a gallon this summer because of new formulation requirements, said Rayola Dougher, senior policy analyst with the American Petroleum Institute.

"Unstable gasoline prices make budgeting for fuel costs extremely difficult for families and businesses," AAA said in a statement.

The Orlando, Fla.-based travel agency gets its data from Oil Price Information Service of Lakewood, N.J., which collects retail price information from 60,000 locations daily.

The Energy Department's weekly survey of retail gasoline prices, released Monday, showed a jump to $1.743 in the national average for regular grade gasoline in the week that ended March 22. That was up from $1.724 the week before but 0.4 cents below the record the agency reported last August. The department's Energy Information Administration compiles the data weekly from a sampling of about 800 locations from a database of 115,000 stations monitored.

Gasoline prices traditionally rise between March and May as refiners temporarily shut down their plants in preparation for the peak summer driving season, when special, clean-burning blends of fuel are required. These shutdowns shrink supplies.

This year, the effect on price has been magnified because commercial inventories of gasoline already are low. For the week that ended March 12, U.S. gasoline inventories stood at 199.6 million barrels, down from 202.1 million barrels a year ago.
 
The most recent statistics from the Energy Department show that gasoline demand has been roughly 4.5 percent higher than last year over the past four weeks, at 8.9 million barrels a day. Moreover, refiners are maintaining extremely lean inventories because of the high price of crude oil, another factor contributing to higher fuel prices.

Crude oil for May delivery sold for $37.45 per barrel yesterday on the New York Mercantile Exchange, near its highest level in 14 years.

AAA spokeswoman Janet Ray said Washington tends to have higher prices because of the small number of oil refineries and pipelines in the state. Most of the state's gasoline has to be brought in.

"Geographically if you look at where the refineries are, they are usually in middle in country," she said. "We are an unattractive area because of the transportation issue. There is no pipeline into Seattle. It puts us at a competitive disadvantage, and that's why we tend to have higher gasoline prices than the national average."

Some Democratic lawmakers criticized the Bush administration for contributing to the recent run-up in fuel costs by continuing to purchase oil for the nation's Strategic Petroleum Reserve at a time when supplies are tight, driving prices even higher.

Sen. Carl Levin, D-Mich., questioned the diversion at a time when private oil inventories, at 281 million barrels, are 23.4 million barrels below the five-year average for this time of year, according to the Energy Department.

"When supply goes down in the private inventory, the price is going to go up," Levin said. He said high energy prices have been "a drag on the economy" and pose national-security concerns.

Sens. Charles Schumer of New York, Barbara Boxer of California and Harry Reid of Nevada urged the Bush administration to release oil from the reserve, which was close to its 700 million-barrel capacity at 648 million barrels as of March 12.

Energy Secretary Spencer Abraham has repeatedly said that the administration views the petroleum reserve as an emergency stockpile for national security and that it should not be used to manipulate prices.

The amount of oil being taken off the market "is fairly negligible" in a global oil market of 86 million barrels a day, Abraham said yesterday at a Senate hearing.

The present price of gasoline is still significantly lower than the inflation-adjusted peak of $2.77 a gallon in 1981, according to the American Petroleum Institute. "In relative terms, we've seen much higher prices," Dougher said.

But AAA had a different take.

"Economists may find it helpful to discuss inflation adjustment, but a big increase in the monthly gasoline bill is a large burden to this country's families and businesses," said AAA spokesman Geoff Sundstrom in Florida.

Compiled from reports by The Associated Press, Knight Ridder Newspapers and Seattle Times staff reporter Vu Nguyen.

Copyright © 2004 The Seattle Times Company