Gas may hit $2 a gallon by summer's end Analyst: Richardson's pleas to refiners 'too little too late'

By Myra P. Saefong, CBS MarketWatch Last Update: 9:13 PM ET May 26, 2000

With tight reformulated gas supplies, gasoline prices in major U.S. cities are already pushing $2 a gallon, said Phil Flynn, a senior energy analyst at Alaron.com.

He believes the nationwide average will jump this weekend, which marks the start of the summer driving season.

The AAA predicts that more than 28 million Americans will drive 100 miles or more this weekend even with retail prices at a national average of $1.53 a gallon.

The average will likely jump about 20 cents a gallon from where it is now within the next three weeks, Flynn said.

"It's a scary situation when it comes to gasoline prices," he said.

In the futures market Friday, June gasoline's intraday high of $1.026 a gallon took out the early March high of $1.025, Flynn said. See full story.

High stakes; low supplies

Political stakes will go up dramatically next week, Flynn said. U.S. Energy Secretary Bill Richardson will be pressuring oil producers to boost crude production, but even if OPEC members go for a boost, "it'll probably be viewed as too little too late."

The American Petroleum Institute and the Energy Department both confirmed drops in last week's supply of reformulated gasoline to total U.S. stocks just over 43 million barrels -- that's about 2 percent lower than the year-ago level, according to the Energy Department's data.

The API reported a 1.4 million barrel rise in last week's total U.S. gasoline stocks, but that's still more than 17 million barrels below last year's level.

There has also been concern over the last few days that the Environmental Protection Agency may decide to grant waivers on reformulated gasoline to cities that are low in supplies for the summer season. St. Louis has already received a temporary waiver.

U.S. refineries are already working at close to 95 percent of capacity, "do we now expect that they can reach 100 percent without the normal mechanical breakdowns?" Flynn asked.

"The die has been cast," he said. "The summer driving season is here."

http://cbs.marketwatch.com/archive/20000526/news/current/gasoline.htx?source=blq/isynd&dist=isynd

-- Martin Thompson (mthom1927@aol.com), May 27, 2000