- The Washington Times - Friday, March 17, 2006

Average gasoline prices in Washington have gone up 11 cents a gallon since Monday, according to AAA Mid-Atlantic.

Prices in both Maryland and Virginia have increased by 9 cents over the same period. Prices have increased by an average of 7 cents across the nation.

In the District, prices jumped 4 cents between Thursday night and yesterday morning, to an average of $2.42 per gallon, 37 cents more than this time last year.

“It’s very troubling,” said John B. Townsend II, AAA Mid-Atlantic’s manager of public and government affairs. Mr. Townsend attributes the spike to multiple factors.

“You see this kind of spike almost every spring, almost like a robin, a harbinger of spring,” he said. It is a sign that refineries are preparing to make their summer blends.

The spring rise in gas prices, which usually peaks around Memorial Day, is being exacerbated this year by the shutdown of big oil refineries on the Gulf Coast resulting from devastating hurricanes that prompted refineries still in operation to run full tilt during the winter, delaying their annual spring maintenance and repair operations, analysts say.

Refineries are in the midst of maintenance season and are temporarily shutting operations. In addition, some refiners are closing units to retool for producing cleaner-burning ethanol-blend gasoline, which is reducing supplies entering the market.

Another development causing bottlenecks at refineries this year is new environmental regulations requiring a reduction of sulfur in diesel fuels and phasing out the additive MTBE, methyl tertiary butyl ether, which has been linked to groundwater pollution.

The prospect of refinery bottlenecks and shutdowns sent wholesale gasoline prices soaring by nearly 10 percent this week on the New York Mercantile Exchange, despite higher-than-normal inventories of gasoline.

Prices at the pump followed suit, but prices hovering around $2.50 a gallon remain far below the record of more than $3 reached after Hurricanes Rita and Katrina last fall.

Prices for gasoline and crude oil also have been pushed higher this year by uncertainty about supplies in Nigeria and the Middle East. Some Iranian officials have threatened to cut off oil exports if the U.S. and other nations impose economic sanctions on the oil exporter for pursuing nuclear arms.

In Nigeria, output has been disrupted by a wave of militant attacks over the past two months that have forced the country to cut daily exports by 20 percent. A militant group, demanding a greater share of the oil wealth, has threatened more attacks.

The loss of Nigerian crude is particularly unwelcome as the summer driving season approaches, analysts say, because it is lighter in quality with less sulfur content, making it much in demand at refineries because it is most suitable for producing the lighter and cleaner summer blends of gasoline required under U.S. law.

Venezuela, Indonesia and Iraq also are experiencing shortfalls in crude production right now, according to Jason Schenker, economist at Wachovia Corp.

The glut of oil that developed because of the unusually mild winter should be pushing down prices, he said, but various geopolitical pressures are keeping prices high.

In any case, even if oil prices decline, the new environmental requirements on refineries will prevent much relief from being passed onto consumers, he said.

The AAA’s Mr. Townsend blamed the price spike more on speculation than on any shortage of supply or excess demand. The Organization of Petroleum Exporting Countries yesterday reduced its estimate of world demand for oil this year by 100,000 to 84.5 million barrels a day.

“[The] supply situation is great,” Mr. Townsend said, referring to the ample inventories of gasoline and crude oil piling up at refineries. Gasoline inventories are 60 percent above normal and crude inventories are 10 percent above last year’s levels.

Mike Burdette, a senior analyst at the Energy Information Administration, said that supply is adequate from inventories that “soared” during the warmer-than-usual winter. He does not expect pump prices to keep rising at a dramatic rate.

“It tends to go in spurts,” he said. “I would expect to see a correction.”

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