US gasoline prices to hit record for Memorial Day

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WIRE:05/25/2000 16:41:00 ET US gasoline prices to hit record for Memorial Day

NEW YORK, May 25 (Reuters) - Drivers in the United States are expected to pay the highest gasoline prices ever recorded in the country this Memorial Day weekend, and according to industry groups they can blame a little-known misstep between U.S. oil companies and environmental regulators. Many of the 35 million Americans packing their cars for long-weekend vacations will have heard little about the new green fuel rules, but they will soon become acutely aware of the unwelcoming numbers hanging over the pumps.

"U.S. gasoline producers failed to rise to long-awaited environmental standards set to hit this summer, and now there are fears of shortages," said Geoff Sundstrom, spokesman for industry watchdog the American Automobile Association (AAA). "Consumers are paying the price."

U.S. drivers are currently paying an average of $1.53 for every gallon they put in their tanks, up roughly 37 cents a gallon from last year at this time and only one penny lower than the all-time national high recorded last March, according to data compiled by the Oil Price Information Service (OPIS).

But industry analysts say that fears of shortages for green gasoline this summer, combined with expected high demand among drivers this weekend, could mean motorists all over the country pay more money per gallon than they ever have before.

"We're looking at extremely high prices that drivers have never seen in the past," said Sundstrom.

DRIVERS HIT BY HIDDEN-HAND OF EPA

At issue is a new cleaner-burning gasoline standard that will be required at roughly a third of the nation's gas stations June 1 -- part of an effort by the Environmental Protection Agency (EPA) to reduce smog pollution.

Refiners, who have been devoting their efforts to producing the summer fuel since early spring, claim the new gasoline is more difficult to make than conventional gasoline and they are unable to produce as much.

Fears of shortages of the new green gasoline, only days ahead of the deadline, have already prompted a handful of marketing associations in the Midwest to request leniency from the EPA, allowing them to sell dirtier conventional fuel.

The flummox pushed benchmark gasoline futures prices on the New York Mercantile Thursday above $1.00 a gallon for the first time since March 13, before oil producer group OPEC decided to raise its exports to ease strangled U.S. supplies.

"We can't blame OPEC this time," said Sundstrom. "They promised to raise production and they've lived up to that. This is a domestic issue. It has become necessary for the EPA to grant waivers to prevent shortages."

The EPA, so far, has granted leniency in St. Louis, Missouri, and is considering waiver requests from Chicago and Milwaukee amid spiraling concerns over inventories there.

According to OPIS U.S. pricing data, retail gasoline prices were the highest in Illinois on May 25, averaging $1.72 a gallon -- roughly a nickel more expensive than in California, where prices are usually the most expensive in the nation.

In Connecticut, where taxes are a large price component, gasoline is pegged at $1.65 a gallon. According to a survey by the New York City Consumer Affairs Office, gasoline prices in the Big Apple averaged $1.60 a gallon.

THE GASOLINE DREAM

But while U.S. drivers may feel they are paying through the nose for their fuel, they should actually consider themselves lucky -- their gasoline prices are among the lowest on the globe.

In countries like England, Italy, France and Sweden, for example, the taxman often takes up to 80 percent of the full charge for retail gasoline as a favourite form of government revenue raising.

British drivers last year paid an average of $4.26 per U.S. gallon compared to the U.S. average of $1.16.

Furthermore, when adjusted for inflation, U.S. gasoline prices work out to be about $2.50 a gallon lower than they were in 1980 following the supply disruption created during the Iranian Revolution.

"In real terms, consumers today are paying considerably less for gasoline than they did during World War I," said Daniel Yergin, Pulitzer Prize winning author and oil analyst for Cambridge Energy research Associates.

http://abcnews.go.com/wire/World/reuters20000525_3398.html

-- Martin Thompson (mthom1927@aol.com), May 25, 2000


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