- The Washington Times - Tuesday, March 9, 2004

AAA Mid-Atlantic is warning area drivers to expect gasoline prices to reach $2 per gallon this summer as pump prices approached record levels yesterday.

The national average for regular unleaded gasoline yesterday rose to $1.74 per gallon, 1 cent shy of the record, according to the federal Energy Information Administration. In Washington, gasoline averaged $1.71 per gallon, 9 cents short of the $1.80 local record set in May 2001.

The outlook is expected to worsen as domestic oil inventories dwindle, and political problems in the Organization of Petroleum Exporting Countries threaten to further reduce supplies. U.S. inventories are down to two-weeks supply, compared with the normal one-month supply.

“All of the experts are pointing to gas prices of over $2 per gallon” by this summer, said Deborah DeYoung, spokeswoman for AAA-MidAtlantic.

Summer is the peak driving season, mostly because of vacations.

Energy Secretary Spencer Abraham said the Bush administration was “extremely concerned” about high gasoline prices.

United Nations diplomats have been negotiating with the OPEC countries to convince the oil ministers to increase production.

Energy Department officials said factors that have elevated crude-oil prices include unrest in Venezuela that threatens to unseat President Hugo Chavez and federal regulations requiring blending of gasoline with chemical additives to reduce harmful emissions. Crude oil closed down 87 cents per barrel yesterday to $36.39 on the New York Mercantile Exchange.

In addition, several states are increasing gasoline taxes. Maryland is considering a tax increase of up to 10 cents per gallon. Virginia is considering a tax increase of 3 cents per gallon.

Despite international negotiations, OPEC members plan to carry through on their agreement last month to reduce production quotas by 1 million barrels per day beginning April 1.

“No matter how you slice it, the supplies now coming out of OPEC and other producers around the world look fairly tight,” said Ron Planting, economist for the American Petroleum Institute, a trade association for the U.S. oil industry.

“If you’re a gasoline consumer, your choices are fairly limited,” Mr. Planting said.

Violent protesters in Venezuela are demanding a referendum on Mr. Chavez’s presidency and threatening to revive last year’s strike by oil workers. The strike briefly stopped oil production in Venezuela, which is the third-largest oil supplier to the United States.

Oil-production facilities in both Iraq and Nigeria are being hit by sabotage.

However, demand for gasoline in the United States remains strong as the economy gains momentum.

“Energy demand is up 3 percent over a year ago,” said Miss DeYoung of AAA-MidAtlantic.

Last week, demand reached a weekly record for February, at 8.97 million barrels a day.

However, the price of gasoline is escalating even faster.

“Prices have gone up more than 10 percent since the start of the year,” Miss DeYoung said. “At some point, that is going to have to bite businesses and families.”

Unleaded regular gasoline hit its national record of $1.75 per gallon in August.

Nevertheless, vacation travel by automobile remained high, which is likely to occur again this summer, Miss DeYoung said.

“Driving, especially family driving, is still the cheaper alternative for vacations,” she said.

Service-station owners say they are enduring the hardships along with their customers.

“There’s not much we can do about it,” said Kirk McCauley, owner of Beltsville Shell service station at 10920 Baltimore Blvd. in Beltsville. “We’re like the messengers: We just pass on the bad news. I’m making 2 cents less on regular than I was six months ago.”

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