A Justice Site
Mirror Sites:
CSUDH - Habermas - UWP - Archives
California State University, Dominguez Hills
University of Wisconsin, Parkside
Soka University Japan - Transcend Art and Peace
Created: March 7, 2003
Latest Update: March 7, 2003
jeannecurran@habermas.org
takata@uwp.edu
Backup of Gas Prices Hit Record Highs In 16 States; Shortages LoomGas Prices Hit Record Highs In 16 States; Shortages Loom
By ALEXEI BARRIONUEVO
Staff Reporter of THE WALL STREET JOURNALAs crude-oil prices rise, U.S. gasoline supplies are dwindling, even leading to shortages in some cities, and prices at the pump have shot to all-time highs in 16 states.
Worries over a war in Iraq, a cold winter, the lingering effects of a recent labor strike in oil-producing Venezuela and complications in the increasingly lucrative oil-refining business are having potent effects on gasoline supply. One result: For some big oil companies, the profits could be huge.
Pump prices in California have soared to more than $2 a gallon on average and have climbed more than in any other region in the country. One reason may be that California refining companies are currently reaping profit margins that are as much as 21% above the average for the past seven years, based on typical industry costs, according to the California Energy Commission. Moreover, the state, which uses cleaner gasoline blends than in most parts of the country, is requiring refiners to switch to a new blend, which is leading to scattered shortages.
Bob Slaughter, president of the National Petrochemical & Refiners Association, denied that refiners were gouging. "There is no reason to think that refiners are getting a larger share nationwide than is normally the case," he said. In California's case, he said, "this is a very difficult year for California refiners because of the difficult transition" to the new gasoline blend. . . .
Inventory was so slim at a Carson, Calif., terminal that on Tuesday Tesoro Petroleum Corp. ran out of gasoline after one of the company's tankers was delayed from Northern California, sending customers scrambling for supply, said Bob van der Valk, manager for Cosby Oil Co., an independent marketer. A Tesoro spokeswoman said gasoline supply returned to normal on Wednesday.
Tight crude supplies have left refineries scrambling for feedstock throughout the West. Major refiners in Phoenix and Washington state are struggling to supply their own branded retail stations, and have cut off other independent distributors, which frequently act as a check on retail prices, industry analysts said.
In Phoenix, which gets most of its gasoline from California, several major suppliers, including Tosco, a unit of ConocoPhillips, and Valero Energy Corp., have suffered brief shortages at their wholesale distribution centers in recent days, according to Oil Price Information Service, an industry monitoring firm.
ConocoPhillips said it hasn't run out of gasoline in Arizona but acknowledged that supplies are tight. A Valero spokeswoman said only that the company has been able to supply its branded retail stations in that state.
American motorists are expected to see retail gasoline prices set an all-time high this spring as refiners gear up for the summer driving season. The U.S. Energy Information Administration said Thursday it expects a peak of $1.76 a gallon of regular unleaded as a national average next month, up from $1.70 a gallon currently. This would top the record price of $1.71 a gallon in May 2001.
Soaring gasoline prices are being fueled by rising crude-oil prices, which averaged about $36 last month, a level not seen since 1990. The EIA said Thursday that total U.S. commercial stocks of crude and refined products, including gasoline, fell about 10%, or 101 million barrels, between the end of September and the end of February.
The U.S. and the world's oil-consuming nations may release strategic stocks of crude in case of further oil disruptions. Even so, EIA officials say inventories are unlikely to build at rates that would be required to balance the market and bring the price of oil well below $30 a barrel for the remainder of the year.
Some lawmakers have begun to blame refiners for not producing more gasoline. U.S. refineries are producing at only 86% of their capacity, about where they were producing last year, when refined-product prices were depressed by slumping demand following the Sept. 11 attacks. And cold weather is forcing refiners to maximize production of heating oil, which led to a decrease in gasoline production of 200,000 barrels a day last week, the EIA said.
Democratic lawmakers this week also blamed President Bush's decision to aggressively contribute to the country's Strategic Petroleum Reserve for causing a big decline in commercial oil stocks and a big rise in energy prices. The Bush administration said the amount added to the reserve was too small to have an impact on markets.
In California, gasoline production is 15% below this time last year and the state Energy Commission said Thursday that despite high prices, refiners there have failed to improve output over the last six weeks as they struggle to make the difficult new blend of gasoline and attempt to come off of planned maintenance. The maintenance has taken about 10% of California's production off the market, a greater amount than in recent years.
Pump prices in California have risen 68 cents a gallon, or 51%, over the past year, compared with an average jump of 54 cents a gallon, or 47%, nationally. The disparity can be explained by several factors. Since becoming the first state in the nation to adopt an ultralow emissions blend seven years ago, California has often charged more for gasoline than anywhere else in the country. Special blends have made it difficult to import gasoline in times of tight supply -- unlike the East Coast, where Europe often sends gas -- and recent oil-company mergers have reduced the number of refining companies operating in the state to only seven. Those seven refiners control some 90% of the state's retail outlets, creating more pricing power.
This spring, California is facing a new challenge in switching to a new gasoline blend that contains ethanol, a corn-based gasoline additive that is replacing MTBE as an emissions-controlling agent. For each gallon of gasoline, refiners use a smaller amount of ethanol than they did MTBE because ethanol is more volatile. As a result, the switch is reducing the overall California gasoline supply by as much as 10% at a time when the state can ill afford to be without.
-- Thaddeus Herrick in Houston contributed to this article.
Write to Alexei Barrionuevo at alexei.barrionuevo@wsj.com2
URL for this article:
http://online.wsj.com/article/0,,SB1046991175189528600,00.htmlHyperlinks in this Article:
(1) mailto:alexei.barrionuevo@wsj.com
(3) http://online.wsj.com/article/0,,SB10469692854081200,00.html
(4) http://online.wsj.com/article/0,,SB104645992557439400,00.html
(5) http://online.wsj.com/article/0,,SB1046043210920348983,00.htmlUpdated March 7, 2003