Pumped-Up Production Could Ease Summer Gas Woes

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Gas prices at Tom's Shell in Madison, Wis., get out of hand

Worried about a summer of $2 gas? You could do worse. In California and Chicago — where average per-gallon prices have already passed $1.95 — drivers could be looking at a heavy $3 a gallon when the summer driving season gets under way, according to a survey of local dealers by USA Today.

The problems are the usual ones — California is short on reserves of reformulated gas, a cleaner-burning blend required by the EPA in certain urban (read: smoggy) areas in summer. Chicago is at the bottleneck of the Midwest refinery supply line; prices go up as soon as one of the area's suppliers (like the Tosco refinery in Wood River, Ill., that had a fire last week) goes down.

But nationwide, there is hope for the summer driver — and the consumer-driven U.S. economy that counts on trekking families in the months between Memorial Day and Labor Day for a good bit of its economic adrenaline.

In the past two weeks, gasoline inventories jumped 6.2 million barrels, to 199 million barrels, according to preliminary data released last week by the Energy Department. And in the past week alone, inventories grew twice as much as was expected, as refiners upped production of tank-ready gasoline to 96 percent of their operable capacity. Refineries don't usually hit that mark until mid-summer. And gasoline imports, especially from Europe, doubled — to an all-time high — over the same period.

Now it's up to the refineries to keep cranking out that go juice. Some analysts are optimistic — without widespread problems at refineries, they say, there should be plenty of gas to go around, easing pump prices back to traditional summer levels by late July. (U.S. retail prices averaged $1.63 a gallon last week, 19 cents higher than in March and already above the $1.52 a gallon that the Energy Department had previously forecast for June.)

There's also the possibility that if things get too bad, the Bush administration may ride to the rescue by having Christie Whitman's EPA grant waivers to refiners asking for the summer off from those pesky reformulation regulations.

But others wonder if refineries already running at near-full capacities will be able to keep it up without more of the sort of glitches, mechanical and otherwise, that have been haunting the marketplace all winter — especially as refineries in Europe head into their own closed-for-routine-maintenance season and leave their U.S. counterparts under even more pressure to keep cranking at top speed. There's also a market factor: Because of fierce competition at the street level, the Exxons and Shells of the world tend to raise prices as slowly as they can in times of scarcity — and then make up the lost profits by lagging their decreases behind market pullback.

Ironically, the very factors that make a road trip economically feasible this summer may be the same ones that keep vacationers at home. With gas prices already pre-seasonably high and rising unemployment — which ticked up two tenths to 4.5 percent for April — still threatening to put a damper on consumer confidence as the summer heats up, enough folks could be canceling their annual excursions to keep demand pressures down.

Considering that thanks to worsening gridlock, the average commuter spends 36 hours a year sitting in traffic, according to a new report, a little unemployment — and a stifling summer for the economy — could go a long way.