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Gasoline prices in US begin to soar

Running out of gas * US gasoline inventories fell in the week ended Feb. 21 for the fourth week in five. * The average US price of gasoline at the pump was US$1.658 in the week ended Feb. 24. * The price may rise to US$1.85 a gallon by summer.

US retail gasoline prices, up 45 percent in the past year, have further to climb, analysts said. After all it's only March.

Gasoline prices are at a record for this time of year, and they typically rise from now until summer as weather warms and people drive more. The retail gasoline price has risen an average of 15 percent from February to May the past five years, according to government data.

"I think you can expect to see steadily rising prices," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, which markets gasoline and heating oil to local distributors. "The gasoline picture looks like it's going to be very lean for quite some time."

US inventories of gasoline are below a year ago and falling, while supplies of crude oil have been pinched for three months by a strike in Venezuela. The possibility of US-led war in Iraq to rid the country of weapons of mass destruction raises concern there will be further disruption of crude-oil shipments.

"This is the time of year when typically you have high stocks and you're building," said Steven Strongin, head of commodities research at Goldman, Sachs & Co. "This year, it's hard to figure out how you're going to build them."

US gasoline inventories fell in the week ended Feb. 21 for the fourth week in five and are 3.5 percent below a year ago, according to the US Energy Department. Crude-oil inventories are 14 percent below a year ago, as the strike in Venezuela has choked off supplies from the world's fifth-largest oil exporter.

The lack of crude leaves US refiners ill-prepared to make the gasoline needed for the summer season, according to Strongin and other analysts.

"Crude-oil inventories are dangerously low," said Phil Flynn, a senior energy trader at Alaron Trading Corp in Chicago. "We are only one small problem away from the minimum amount needed to operate the nation's refineries."

The average US price of gasoline at the pump was US$1.658 in the week ended Feb. 24 and reached US$1.66 a week earlier, according to the Energy Department. That's the highest since June 2001, and a record for February in the 13 years the department has been keeping this data.

Silliere said the average may rise to US$1.85 a gallon by summer. Strongin said a 20 percent increase would be possible from current prices, which would bring the national average to US$2 for the first time.

"Prices historically go up in the summer," said Steve Nolan, spokesman for the AAA Chicago Motor Club. "Coupled with higher crude oil prices and the potential war with Iraq, it's safe to say we're going to see an increase" between now and summer.

Refiners are passing along the rising cost of crude, which this week touched US$39.99 a barrel on the New York Mercantile Exchange, the highest level since Iraq occupied Kuwait in 1990.

The rise in gasoline prices is putting an additional burden on US consumers already facing surging heating costs from a colder-than-normal winter, analysts said.
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