- The Washington Times - Friday, April 21, 2006

Oil prices soared above $75 a barrel for the first time yesterday and gasoline prices officially passed the $3-per-gallon mark in the District amid scattered temporary outages at dozens of gas stations in Washington and the Mid-Atlantic region.

Average prices at the pump surged as federal fuel-switching requirements created sporadic shortages, while rising tensions over Iran’s nuclear program drove up the price of premium crude by nearly 5 percent to a record $75.17 per barrel in New York trading.

The pressure on fuel prices is expected to intensify in the weeks ahead as deadlines loom both in the standoff with Iran playing out before the United Nations and the program for incorporating ethanol into summer fuels, which must be completed by May 6.

“We’re going to see some problems,” Energy Secretary Samuel W. Bodman told reporters in Washington. “I do believe over a period of time — that is, a matter of months — it will level out.”

Mr. Bodman said the nation’s supply of ethanol is adequate, but the logistics of shipping the additive by barge, rail and truck is causing disruptions on the East Coast. Environmental rules that require sulfur reductions in diesel fuel and delayed maintenance at refineries because of the destructive hurricanes last year also are creating supply concerns, he said.

“I think we’ve crossed a very significant psychological barrier,” said John B. Townsend II, AAA Mid-Atlantic spokesman, as regular gas prices in the District breached the $3 threshold for the first time since mid-October, jumping 3 cents overnight Thursday.

“We’ve been seeing it coming but it is painful at the psychic level — it gives people a sense of despair,” he said.

In the Greater Washington area, the average price of gas was $2.93 per gallon. Maryland topped Virginia by 4 cents with a $2.90 average.

“There’s been a double-digit increase in gas prices for the last four weeks and that’s unprecedented,” Mr. Townsend said. “If that same pace continues, we’ll hit the $3 mark in Maryland by this time next week, and I see no sign of that pace abating.”

D.C. gas prices were the third-highest in the nation yesterday, ranking behind California at $3.05 and Hawaii at $3.17 per gallon. The average price nationally was $2.86.

Local gas dealers reported chaotic conditions and delays receiving delivery of fuel blended with ethanol, a clean-burning additive made from corn needed to meet higher U.S. environmental standards in the summer.

“There are a handful of outages being reported across the region, but they are temporary,” said Catherine Rossi, also with AAA Mid-Atlantic. “The problem is waiting for the trucks to get to the stations.”

The Virginia Petroleum Jobbers Association said the state may seek a waiver allowing it to keep selling lower grades of gas, but some analysts doubted that the Environmental Protection Agency would grant such a waiver.

Gasoline producers previously used the additive MTBE (methyl tertiary-butyl ether) to make reformulated gasoline, but they are phasing out the chemical because of the risk of lawsuits after several states banned it for contaminating groundwater. The oil industry sought an exemption from liability from Congress, but lawmakers refused to grant it in legislation passed last year. That led to the wholesale switch this year to ethanol.

Ethanol blends are more cumbersome to manufacture and deliver, analysts say, because ethanol cannot be shipped in pipelines. It absorbs water condensation in the pipes, and therefore must be transported by truck, rail or barge, and blended with gas at local depots. Gas tanks that previously held MTBE-blended fuels must be cleaned before they can be filled with ethanol blends, a process that also is creating delays at many stations.

Lee Raymond, former chairman of Exxon Mobil Corp., told a Columbia University forum last week that regulations governing the switch to ethanol were partly to blame for high prices.

The oil industry warned Congress that if the move away from MTBE was made in the spring when gas stations are switching to summer fuels, “with the limited capacity that every service station has, we are going to end up having an apparent shortage of gasoline,” he said. “And it’s exactly what’s happened.”

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