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The Honolulu Advertiser

Posted on: Tuesday, April 12, 2005

Gas prices set record again

By James R. Healey
USA Today

The government reported record high gasoline prices yesterday for the fourth consecutive week, even as drops in wholesale gas prices had analysts musing about declines at the pump before long.

The nationwide average for unleaded regular is $2.28, up 6.3 cents from a week ago and 49.4 cents more than a year ago, the Energy Information Administration reported in its weekly survey of gas prices.

Prices rose everywhere, EIA said, most dramatically on the West Coast, where the average jumped a hefty 13 cents the past week, to $2.528.

California again had the highest statewide average, $2.592, EIA reported. Premium-grade fuel averages $2.90-plus in that state's priciest regions, motorists' club AAA reports. AAA, using daily transaction data from 60,000 gas stations, reports a nationwide average of $2.276, up 1.1 cents overnight.

Hawai'i's statewide average yesterday was $2.492 for regular unleaded.

Adjusted for inflation, gas would have to break $3.095 a gallon for a nationwide record, according to EIA calculations.

Gasoline is made from crude oil, and oil prices have been well above $50 a barrel since late February, which is when gas prices accelerated. The price of oil accounts for roughly half the price of gas.

The increases reported yesterday came even though wholesale prices for gasoline lost 11 percent last week in "the largest decline in absolute terms in 10 months," according to veteran energy watcher Peter Beutel in his daily Cameron Hanover energy price newsletter.

Energy traders seem at least momentarily convinced that there is enough gas for U.S. summer driving demands and that refineries are cranking out more at a brisk-enough pace to keep that so.

A government report last week showed an increase of 424,000 barrels per day in gasoline output from refineries.

During the peak summer driving season, Americans will use 9.3 million barrels of gasoline a day, EIA forecasts. U.S. refineries are producing 8.6 million of those at last count. The rest is imported.

Wholesale gasoline prices have dropped to around $1.55 a gallon from record levels around $1.70 in recent weeks. That decline, which has been fairly steady, portends lower retail prices.

Using analysts' rule of thumb — add 65 cents to the wholesale price to get the retail price — the nationwide average should peak at about $2.35. If prices continue to climb about a penny a day, as they have the past month, that peak could be this time next week.

It takes little to stampede petroleum traders, though. A refinery fire, maintenance problems or a pipeline break — all fairly common — could push up the wholesale price of gas. The retail price would eventually rise to cover that.