Originally created 04/30/01

Gas prices rise as summer approaches



Gasoline prices are taking a surprise toll at the Mixing Bowl, a highway bottleneck where Interstate 95 meets commuter traffic in Washington, D.C., frequently causing travelers from Miami to Maine to come to a halt.

A $567 million project to revamp the interchange will cost $25 million more because of higher costs for fuel and for petroleum-based asphalt, highway officials say.

Highway cost overruns are just one of the repercussions of rising gas prices. Drivers are suffering, too.

The price of regular gas last week averaged $1.56 a gallon, according to the Energy Department. That's up 12 cents in just two weeks, 8 cents more than a year ago and more than the $1.52 peak the department predicts by June.

The Bush administration blames the higher prices on an energy shortage. President Bush says, "We're short on energy," while Energy Secretary Spencer Abraham warns of a "major energy supply crisis."

Vice President Dick Cheney's energy task force is readying plans to ask Congress to open the Arctic National Wildlife Refuge in Alaska to companies that want to drill for oil and natural gas. The Destin Dome off Florida's Gulf Coast is also under discussion.

Yet for all the crisis talk, energy experts note the United States isn't facing a supply shortage of the sort that had Americans suffering in gas lines in the 1970s, when the Organization of Petroleum Exporting Countries shut the oil spigot.

Economist Philip Verleger, who writes an energy newsletter, thinks gas prices may have peaked. Barring unscheduled shutdowns and surprise disruptions, "the only way for prices to go is down," he says in a new report.

"We don't have a traditional supply shortage; the fact we're headed into summer driving season when demand peaks is the most important factor of all," says senior editor Mary Welge of the Oil Price Information Service, which tracks gas prices for the American Automobile Association and other clients.

Welge says some of the same production problems that sent prices spiking above $2 in some California and Midwest markets last summer could prove troublesome again:

- A fire at a Tosco refinery in Long Beach, Calif., could crimp California's "boutique" gasoline blend supplies that are specially formulated to cut back smog in the Golden State. Even before Monday's blaze, gas prices were $2 a gallon in the San Francisco area and averaging $1.82 statewide.

- Smoggy Midwest cities will experience their second summer with less polluting gasoline blends, required by federal clean air rules. Midwest governors and the AAA did get some relief from the Environmental Protection Agency, which granted leeway in markets where gasoline is blended with ethanol.

But plans to extend gas sales tax moratoriums like the one that cost Illinois $150 million last summer have collided with an economic slowdown that is sapping state treasuries. This year, Illinois Gov. George Ryan announced, the state can't afford a gas tax holiday.

Summer gas price increases should be small in the Southeast, with its abundance of regional refineries and low gas taxes, while the East Coast can expect modest price rises, analysts say.

The slowing economy hasn't stalled sales of gas-guzzling sports utility vehicles: SUV sales are up 11.5 percent the first three months of 2001 over the same quarter a year ago, although the fastest-growing category is crossover utility vehicles, or CUVs, including the Ford Escape, the Chrysler PT Cruiser, Toyota RAV4 and Subaru Forester.

Their smaller sticker price and greater gas mileage fit best with many family budgets, says economist Paul Taylor of the National Association of Automobile Dealers.

That may be to the national good: According to the National Resources Defense Council, if SUVs got only three more miles a gallon, Americans would save 49 million gallons of gas a day. That's 7 million gallons more than the 42 million gallons daily the Arctic National Wildlife Refuge could produce at best, according to Energy Department predictions.