Gas Price Close to Historic Record

A motorist refuels his vehicle in Chicago. Gasoline prices approached their 1981 record last week when adjusted for inflation, the Energy Department said.
A motorist refuels his vehicle in Chicago. Gasoline prices approached their 1981 record last week when adjusted for inflation, the Energy Department said. (By Scott Olson -- Getty Images)

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

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.

Top Democrats in Congress jumped on the chance to blame oil companies and the Bush administration. "The oil companies have two words to say about these new record high gas prices: mission accomplished," House Democratic Caucus Chairman Rahm Emanuel (Ill.) said in a written statement. "For six years, Republicans did nothing to make our nation energy independent while handing out taxpayer funded giveaways to big oil. Now the American people are paying the price."

On Wednesday, the Joint Economic Committee will hold a hearing on whether to break up the nation's biggest oil companies. Other measures in Congress seek to prod the Federal Trade Commission into investigating whether there is gasoline price gouging.

Separately, the Consumer Federation of America yesterday released the results of a survey that showed that Americans favor higher fuel efficiency standards for motor vehicles even if it raises the prices of cars and trucks. But the survey also showed that Americans do not grasp U.S. reliance on oil imports. Fifty five percent of those surveyed said they thought that the United States holds 20 percent of world oil reserves; in fact, it holds just 3 percent.

The Energy Information Administration also released a worrisome international energy outlook yesterday. It forecast a 57 percent increase in world energy consumption by 2030 and an increase in energy-related carbon dioxide emissions to 42.9 billion metric tons from 26.9 billion metric tons in 2004 . The agency assumed modest growth rates and a continuation of current government policies.


© 2007 The Washington Post Company

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