Several hundred taxicab drivers honked horns and shouted demands for more gasoline and higher fares as they blocked traffic to hold two rallies yesterday in downton Washington.

For more than an hour in early afternoon, the cabs were parked two abreast along two streets leading to the District Building as their drivers demonstrated in the middle of E. Street NW, forcing police to detour motorists onto 14th Street and Pennsylvania Avenue.

They cheered and shouted questions - mainly about soaring gasoline prices - as aide to Mayor Marion Barry announced that an extra 100,000 gallons from the District of Columbia's reserve fuel allocation of June was being diverted to seven service stations that sell only to cabs.

Then, hoping to pressure the city Public Service Commission into granting an immediate fare increase, the cabs threaded a half-mile through downtown traffic and began parking in front of the Cafritz Building, 1625 I Street NW, that houses the PSC offices.

With cabs backed up for two blocks to the west, they stalled traffic for another hour on one of the city's busiest crosstown streets. Dozens of motorists trying to leave parking garages sat impatiently, blocked until the cabs dispersed.

When drivers failed to head a plea to move by Jack Dembo, one of their leaders, two dozen police donned riot helmets and moved to curbside as a crane maneuvered into position to start towing cabs away. Wihout waiting for a direct confrontation, the cab drivers began driving away.

But they said they would set up a picket line outside the PSC office this morning when the commission opens procedural deliberations on the fare increase request. One of the requests is for a 25-cent surcharge, in addition to current fares.

The PSC granted a cab fare increase of just under 10 percent last January. Barry has urged that a new 10 percent increase be granted soon.

Deputy Police Chief Robert W. Klotz, head of the special operations division, estimated that 300 or 400 cab drivers participated in the rallies. The city has nearly 7,000 licnesed cabs.

The mood of many drivers who pressed toward Dembo and other speakers as they spoke from the hoods of parked cars at both locations was angry. But others, standing near the edge of the crow, voiced quiet desperation at the economic squeeze they are experiencing.

One driver who would not give his name said he cannot pay this month's rent because higher costs, fewer riders and time spent in gas lines has squeezed his daily take-home pay from above $50 to less than $40.

"Metro, with its government subsidy, is taking our market," said Thomas Ruffin, another drver. "We need more to survive."

Dembo, a Yello Cab driver, organized yesterday's rallies as an individual, along with the heads of two driver groups, Thelmiah Lee Jr., of the Committee to Unionize Taxicabs, and Joseph Bradley, of the Professional Drivers Association.

If the PSC fails to meet demands for higher fares by Wednesday, Dembo said, drivers will began a slowdown in the downtown cab zone and will refuse to pick up passengers on Capitol Hill. Those who make pickups will do so "at their own risk," Dembo said.

Mary E. Brazleton, executive secretary of the PSC, said this morning's meeting us a procedural one, scheduled to arrange hearings over the next few months on the cab fare issure. She said no immediate decisions are expected.

The increased allocation of gasoline for cabs was announced by Edward Meyers, a special assistant to the mayor. He said Barry would grant 200,000 extra gallons from the city's reserve to the cab industry in July, and had asked the Department of Energy to grant another 1.7 million gallons. CAPTION: Picture 1, FINGER-POINTING - Gasoline customer, third from left, gestures toward police officers during an argument with a station attendant at New York Ave. and Bladensburg Rd, NE. The customer had to pay $5 minimum for gasoline and could only get $3.76 worth into tank. Police ordered him to move along. By James M. Thresher - The Washinggon Post; Picture 2, Cab drivers park their cars at District Building, disrupting traffic along 14th Street yesterday; Picture 3, Jack Dembo, left, and Thelmiah Lee Jr. organized cab drivers' protest. Dembo called for a job "slowdown." Photos by Ellsworth Davis - The Washington Post