Gasoline Guzzlers Beware: Summer Fuel Prices to Soar

By , Staff writer of The Christian Science Monitor

HITTING the road this summer is likely to be more expensive.

Gasoline prices at the pump are clicking up and energy experts expect prices to continue to rise prior to Memorial Day weekend.

The price of unleaded regular gas nationwide is up 5 cents a gallon over the past month, according to St. Paul, Minn.-based Computer Petroleum Corporation. And gas prices are up 8 cents a gallon from last year.

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In some parts of the country, however, the rise has been sharper. In Florida, for example, the American Automobile Association (AAA) reports the price of unleaded fuel has soared by 7 cents a gallon in the past two weeks. ''It's the sharpest price increase in the shortest time since Florida AAA has been conducting gas-price surveys,'' says Jerry Cheske of the AAA in Heathrow, Fla.

Energy analysts believe there are a number of reasons behind the gasoline-price hikes. Oil prices have jumped in the short-term because of a US boycott of Iranian oil. Gas prices are high, too, thanks to greater demand from motorists able to drive during this year's mild winter. And prices at the pump are climbing since it costs oil companies more to refine a cleaner-burning fuel.

Crude-oil prices are now hovering at about $20 per barrel, the highest level in three years. ''Oil prices got a temporary kick from a number of factors including the Iranian boycott,'' says Margaret Rhodes, a senior energy analyst at DRIInc. in Lexington, Mass.

President Clinton last week announced an economic boycott of Iran that would take effect at the beginning of June. Although the US does not directly import Iranian crude oil, US firms have been buying about 600,000 barrels of Iranian crude per day to supply worldwide needs. Under the boycott, they will have to buy that oil elsewhere.

''There will have to be a little shuffling,'' Ms. Rhodes says. She believes the crude-oil price hike has yet to be fully reflected in the retail price of gasoline. Consumers can expect the peak for gasoline prices to come later in the month, Rhodes says, but the ''bulk'' of the increase has already made it to the pump, she adds.

The spike in crude-oil prices comes at a time when oil companies are normally shopping for increased supplies to ready for the summer-driving season. ''This is the time of year when crude oil prices are at their highest levels,'' says Alvin Silber, an analyst at Herzog Heine Geduld Inc., a New York brokerage house.

The warm winter also helped to push up the price of gas because Americans were able to drive more than normal. According to the American Petroleum Industry statistics, demand for gasoline rose 1.4 percent in the first quarter compared with the first quarter of last year. ''There would not be that much growth without the weather change,'' Mr. Silber says. In a normal winter, demand would only grow by 0.5 to 1 percent.

The strong demand has continued into the spring with gasoline consumption close to the levels normally expected in July or August.

And it's likely that demand will continue to rise over the summer since the battered US dollar is making overseas trips more expensive.

THE current price rise is not a total surprise since the government now requires nine of the largest urban areas to sell ''reformulated'' gasoline (RFG). RFG burns cleaner, but also costs more to refine.

Late last year, oil companies started pushing the new fuel through their pipelines and into their terminals. By law the new gas had to be at the pump by Jan. 1. The refiners generally increased the wholesale price to reflect their higher costs.

The shift to RFG has reduced the volume of imported gasoline since foreign refiners have not invested in the technology to make the new product. In the first quarter imported gasoline dropped by 17.5 percent.

The higher demand this winter reduced gasoline inventories, but worse than that, oil companies are hard-pressed to maintain their past inventory levels because of the many grades of petroleum products. There are now nine different grades of gasoline.

''They have only so many storage tanks so they really can't keep inventory,'' Silber says.

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