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We're paying record prices at the pump

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  • We're paying record prices at the pump

    March 15, 2005, 1:00AM

    We're paying record prices at the pump
    Expect $2 gas — and probably more — as spring sets in

    Copyright 2005 Houston Chronicle

    Gasoline prices smashed dual records Monday as prices in Houston and around the state continued to soar.

    A gallon of regular unleaded in the city now averages $1.91 — up 8 cents in a week and setting a record, according to the U.S. Department of Energy. The statewide average also set a record, at $1.94 per gallon.

    The national price is expected to hit a new mark any day now. As it stands, the U.S. price averages $2.05 per gallon, a penny away from its all-time high.

    Experts expect gasoline prices to trample the $2.06 record set last May, with a steady march upward throughout the spring.

    Just how expensive is $2 gas?

    That depends how far back you remember.

    Drivers who recall 1981 know things could be worse.

    Thanks to a spike in crude oil prices, gas was selling for $1.40 at the start of that year. That might sound cheap today, but in inflation-adjusted terms it was more than $3 per gallon.

    Most car owners remember 1999 a little better.

    At the same time a baby-faced Britney Spears was beginning her run on Top 40 radio, gasoline prices averaged an inflation-adjusted $1.07 per gallon — almost a buck less than today's nationwide price.

    Drivers aren't the only ones who are frustrated.

    Analysts are scratching their heads, wondering just how high gas prices can go.

    Even though spring is typically the low-demand season for gasoline, traders are driving prices up, trying to gauge where driver demand could go in May when Americans take to the road for the busy summer months.

    Tom Kloza, chief oil analyst for the Oil Price Information Service in Lakewood, N.J., says traders are "climbing the wall of worry."

    Often the jittery market's anticipation is worse than reality when it arrives. Last year, prices spiked in the spring as traders warned of a potential gasoline shortage during the summer. The threat never materialized.

    The Energy Department recently put out a report predicting springtime gasoline prices in the U.S. would peak around $2.15.

    Kloza expects prices to hit $2.20 in April but says predicting exactly where they go from there is like trying to predict springtime weather. There are simply too many factors.

    "We may see $60 crude, and if we do, nationwide retail (gasoline) prices could exceed $2.25. But I have real doubts whether we'll stay there for a protracted period," Kloza said. "I don't think we're going to see the apocalyptic $2.75 or $3 [per gallon] number."

    It is easy to predict where fuel prices will go in a three- to four-week time frame because gasoline prices tend to track alongside oil prices, which have been volatile but hanging above $50 per barrel since February.

    Kloza says the recent price creep at the pump is gasoline "playing catch-up" to crude.

    It can take six weeks or longer for overseas oil to reach U.S. shores, where it is refined into fuels for cars and trucks and then shipped to market.

    That means a lot of the crude purchased now doesn't make it to the nation's gasoline stations until May.

    The Organization of the Petroleum Exporting Countries is meeting in Isfahan, Iran, on Wednesday, and Saudi Arabia's oil minister, Ali Naimi, is recommending the group raise its production quotas even though April demand for crude oil is expected to fall by 1.3 million barrels per day.

    "Saudi Arabia is of the opinion that OPEC's production ceiling should be adjusted upwards by 500,000 barrels per day during the forthcoming ministerial meeting," Naimi said in a statement.

    Other OPEC members, including Iran, Qatar, Venezuela, Algeria and Indonesia, want to keep production steady and the quota unchanged.

    U.S. light sweet crude rose 52 cents on the news to $54.95 a barrel, after touching a high of $55.05 on the New York Mercantile Exchange on Monday.
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