The pump seems primed for gasoline woes during the summer driving season: Gas prices have begun rising in recent weeks, and industry inventories are at their lowest seasonal point in years despite the worldwide glut of crude oil.
But oil industry officials insist that all is well; that prices have all but topped out after a short spurt, and that the relatively low inventory levels are a statistical mirage.
Still, industry critics and some analysts believe gasoline prices could shoot up by 7 to 10 cents a gallon in coming weeks as a result of tight supplies, a coming change in federal laws governing leaded gasoline and attempts by all levels of the gasoline industry to make up for profit margins eroded by the slide in gas prices during 1984.
"The market is very volatile," said Lawrence Goldstein, an analyst with Petroleum Industry Research Foundation, a New York-based industry-financed analysis group.
The disagreement in predictions about the gasoline supply and price situation for the summer is largely based on differing interpretations of the myriad and sometimes contradictory statistics kept by and about the petroleum industry. Fuel-storage tanks that some industry-watchers read as half-full are seen by others as half-empty, while price statistics mean different things to different analysts.
The experts agree on what any motorist who's bought gas lately knows -- that prices have risen in recent weeks, after hitting five-year lows in the first part of this year. According to the Lundberg Letter, the Los Angeles-based gasoline industry newsletter, the average price at pumps around the nation, taking all grades of gasoline into account, is currently $1.20 a gallon, up from the low of $1.13 in early February.
To hear some in the industry tell it, that 7 cents increase is about all drivers are going to see. These experts attribute the increase to such factors as a somewhat tighter supply of crude oil as the result of production cuts made by OPEC members over the winter, and to the ripple effect of the end of the long coal strike in Britain. Although British coal would seem unrelated to American gasoline, the strike forced European refineries to turn out more heavy fuel oil to replace the missing coal, and much of the gasoline produced as a byproduct of the refining of the fuel oil was sold cheaply in the U.S. market, pushing down prices here.
Those factors largely have worked themselves through the system, industry officials say; and as a result, they predict, prices should be about ready to level off.
As proof, they point to the "spot" and futures prices of gasoline in the key trading area of New York Harbor. The current wholesale "spot" price there is 77 cents a gallon, while the speculative futures price is 76 cents a gallon for delivery at the end of May and 75 cents for delivery at the end of July. "The futures market . . . [is] anticipating a price decrease," said Edward Murphy, head of the statistics department at the American Petroleum Institute, the industry trade association.
But other analysts disagree. "Gasoline prices are in a powerful upswing," said Dan Lundberg, publisher of the Lundberg Letter. "It's very likely that the overall price will climb another 7 cents in the next four weeks."
Even more pessimistic is Ed Rothschild, assistant director of the Citizen/Labor Energy Coalition, a consumer-advocacy group often at odds with the industry. His group foresees a 10 cents-a-gallon price hike by July 1. "At a time when the world is awash in oil, when there is a huge excess of refining capacity and when gasoline demand is virtually flat, gasoline prices should be falling, not rising," he said.
Lundberg and Rothschild base their predictions in large part on some unusual trends in gasoline inventory figures kept by the API. Typically, the industry's on-hand supplies of gasoline decline in the winter months, as refinery production is given over to home heating oil, then climb during the spring to provide a supply cushion during the summer months.
This year, however, the trend has reversed. Gasoline inventories, which stood at 241.2 million barrels at the beginning of the year, have since slumped to 216.8 million barrels as of the end of last week. That's almost 33 million barrels below the inventory levels at this time last year and the lowest inventory figure in mid-April in years.
The critics say the low inventory levels indicate that the industry is not producing enough gasoline to be ready for the summer driving season, which they say could push prices up, if not result in occasional shortages.
"Inventories should not be this low right now, and because inventories are this low, it's putting upward pressure on prices," Rothschild said. "The fact is that gasoline consumption is where it was last year, if not slightly higher. Therefore, you expect inventory levels to be where they were last year."
Industry officials disagree. They say that while the inventory cycle does appear to be out of sync, the high levels of gasoline inventories in January and a year ago were aberrations -- January's because oil companies had access to cheap crude oil and were turning it into gasoline to beat a possible OPEC supply cutback, last year's because a sudden need for heating oil in February and March produced gasoline as a byproduct and inflated inventories.
"If you're looking at supply, supply is about exactly what it was in 1983," Murphy said. " 'Eighty-four had some unusual circumstances."
The reading of oil industry forecasts is complicated by the wild card of the Environmental Protection Agency's plans to require a reduction of the amount of lead in leaded gasoline beginning July 1. Most analysts believe the new rules will result in temporary supply upheavals and slight increases in leaded gas prices.
Lundberg theorizes that as the price of leaded gas rises after the lead-reduction goes in effect, it could drag other gasoline prices higher by giving oil companies and dealers an excuse to raise their prices across the board.
And Lundberg and other analysts are concerned that some refineries will have trouble being ready in time for the switch from current leaded gasoline formulas to the reduced levels, perhaps causing some shortages of the new fuels.
Industry officials, however, say they see no supply problems and few, if any, price increases as a result of the new rules or other current gasoline supply factors. "There's plenty of refining capacity around, there's plenty of crude around," Murphy said. "I've got no hesitation, no reason why customers should be concerned with the availability of gasoline supplies."
"I don't think the consumer is going to have to any worry about getting gas at his neighborhood station come Memorial Day or Independence Day," Goldstein said. "He may pay a little more for it."