Pain Arrives Early at the Pump
Prices Reach $3 Even Before Peak Driving Season

By Steven Mufson and Sholnn Freeman
Washington Post Staff Writers
Saturday, April 14, 2007

Autistic children and adults in Montgomery County are getting rides to Olney for crafts, dancing and other forms of occupational therapy only three evenings a week, instead of the usual five. Because of soaring gasoline prices, the organization that runs the programs has had to cut back on their visits.

"We're having to make some hard choices," said Christopher Drayton, transportation director for Community Services for Autistic Adults and Children, a nonprofit organization that continues to ferry people to jobs and school programs.

Drivers across the region are making tough decisions about spending on gasoline as pump prices have skyrocketed. In two months, the cost of gas has risen 60 cents a gallon. At some stations, it's now above $3.

The driving season stretching from Memorial Day through Labor Day is known for pinching motorists. But since the devastating hurricanes of 2005, the pain at the pump each year has returned earlier and with a particularly sharp bite, prompting cries from legislators and causing automakers to scramble to produce smaller, fuel-efficient models.

This year, the federal government's Energy Information Administration is predicting that motorists will pay an average of $2.81 a gallon, just six cents less than last summer's steep levels. Others, including James Mulva, the chief executive of ConocoPhillips, warn that prices could hit an average of $3.

At a Sunoco station at 15th and U streets NW this week, Melvin Roberts, a tile layer from Silver Spring, stopped filling his Ford pickup truck when the pump hit $30. That was all he could afford, he said. Roberts pointed to orange buckets and tile-cutting tools in the truck bed used for his livelihood. "I need my truck," he said. "I'll just work harder because life goes on. But I work hard already."

The high motor fuel prices are likely to keep the heat on Congress and the Bush administration to devise new energy policies. House Speaker Nancy Pelosi of California has asked Democrats to come up with energy (and global warming) legislation by July 4. One measure likely to win widespread support would raise the standards for auto mileage, known as Corporate Average Fuel Economy (CAFE).

"High gas prices coming this early in the year should only increase the public's attention on the administration's lack of action on fuel economy and encourage Congress to act quickly on the bills before it," said Joshua Dorner, a spokesman for the Sierra Club.

The recent increase in gasoline prices has outpaced the trend in crude oil prices, baffling consumers. The explanation, oil analysts say, lies within the oil refining business. For three months, gasoline inventories have been sliding, instead of rising in anticipation of the driving season. The Energy Department reported this week that gasoline inventories had dropped 12 percent in the past nine weeks.

One reason for the drop is that U.S. oil refineries have been plagued by a series of fires, power outages and mechanical breakdowns -- what the industry calls "unplanned shutdowns."

At a House Education and Labor Committee hearing on March 22, Kim Nibarger, a health and safety expert with the United Steelworkers union, revealed that the nation's largest refiner, Valero Energy, had eight incidents, including four fires, that curtailed production or forced flaring of gases between Jan. 1 and Feb. 16. One closed Valero's McKee refinery in Texas, which the company expects to return to half of its production by the end of April. On March 26, BP moved up planned maintenance at its Whiting, Ind., refinery after a piece of equipment caught fire. Other major companies have also run into problems.

"Somehow we can't keep our refineries running," said Philip K. Verleger, an Aspen, Colo., oil consultant. "It looks like we've lost 50 million barrels of gasoline production [in the first quarter of 2007], which is 10 days of production. That is significant."

Another reason for the slide in gasoline inventories: strong demand. In the four weeks ended April 6, Americans used 2.5 percent more gasoline than they did a year earlier, setting a record for consumption during April. "Recent data suggest that gasoline demand, however measured, is quite inelastic, meaning that it takes a large increase in prices to significantly affect demand," said the department's Energy Information Administration.

Verleger said that he added up the 25 top-selling trucks and cars for 2005 and 2006 and said that the weighted average fuel efficiency was essentially the same.

"I think for the consumer to make major changes in their buying practices or driving behavior, there probably takes a more sustained higher price signal on gasoline," said Dave McCurdy, president of the Alliance of Automobile Manufacturers.

Despite the mild effect high gasoline prices have had on demand so far, automakers are rushing to produce better-mileage cars for U.S. consumers. In a race with subcompacts from Honda, Toyota and Chevrolet, Nissan introduced the Versa last fall. Chrysler has made a deal with a Chinese automaker to import small cars.

At Brown's Fairfax Nissan, sales manager Mike Petros said the Versa accounts for 20 percent of the dealership's new-car sales. He said the dealership was waiting for the new Altima hybrid to arrive, and he hoped automakers would soon come up with something other than gasoline to power cars.

"We want gas prices to go down like everyone else," Petros said. "We don't want to be relying on gas all the time."

For now, motorists have little choice other than to pay up at the pump. Those consumers, as well as organizations like Montgomery County's Community Services for Autistic Adults and Children, don't have the option of passing along the costs to others. As Ian Paregol, group's executive director, said, "It's a strain that we continue to bear."