Tuesday, May 22, 2007

Gas Prices Close to All Time High

Regular Unleaded Just Shy of '81 Mark

By Steven Mufson
Washington Post Staff Writer
Tuesday, May 22, 2007; D01

Gasoline prices last week came within a half penny of tying the modern era's inflation-adjusted record set in March 1981, the Energy Department said yesterday.

The nationwide price of unleaded regular gasoline hit $3.218 a gallon, barely below the adjusted $3.223 a gallon level 26 years ago. Behind the rise were high crude oil prices and disruptions in output at oil refineries.

The 1981 record was set two years after the Iranian revolution brought down the pro-American shah, seven months after war broke out between Iraq and Iran and two months after President Ronald Reagan ended U.S. oil price and allocation controls.

The current rise in prices has been harder for consumers to understand. While Nigerian insurgents have curtailed production by about 800,000 barrels a day, there hasn't been any major cut in crude oil supplies, and crude oil inventories are adequate.

Instead, industry analysts blame a series of refinery accidents, breakdowns and maintenance closings that have choked off enough gasoline production to drive up prices -- and refinery profit margins -- just before the summer driving season.

"Crude oil prices don't reflect $3.20-a-gallon gas prices," said Frank A. Verrastro, director of the energy program at the Center for Strategic and International Studies. Europeans pay more than twice as much at the pump because of gasoline taxes.

Francisco Blanch, oil analyst at Merrill Lynch, said in a note to investors this month that the "unprecedented" drop in U.S. gasoline inventories had reduced stocks to "the lowest seasonal point in almost two decades." Blanch said that "refinery outages have curbed domestic gasoline production and imports are not coming through due to stiff competition" from other countries.

Oil analyst Philip K. Verleger estimates that refinery problems have lowered gasoline output by 90 million barrels this year, squeezing supplies. more

Having just completed a 1,250 mile trip across half of America I can say it's ugly out there. I paid an average of 3.02 per gallon and had I not been traveling through the gulf states I'd have paid even more.