California May Soon Pay $2 for Gasoline Average Now at $1.71 Per Gallon, Expected to Rise USA TODAY By Dina Temple-Raston

July 05, 2000

California motorists should brace themselves: $2-a-gallon gasoline may be around the corner.

The price is already climbing. Californians paid nearly 6 cents more for a gallon of regular gas last week, up to $1.71, according to the Energy Information Administration (EIA), and analysts expect the price will keep climbing.

The increase comes just as there appears to be some relief for Midwesterners who have been shelling out as much as $2.35 a gallon since May. Last week in the Chicago-Milwaukee corridor, the price of the cleaner-burning reformulated fuel fell more than 11 cents to $1.73, the EIA says.

''The West Coast is the one we're generally looking at now,'' says Tom Kloza, chief oil analyst at the Oil Price Information Service. ''That's the next hot spot.''

West Coast prices are rocketing in response to several refinery bottlenecks and the rising price of Alaskan crude oil, the source for nearly a third of California's oil supply.

Wholesale prices in Southern California rose an average of 12 cents per gallon last week, and San Francisco Bay Area residents saw a 15-cent-a-gallon increase in the same period, according to a California Energy Commission report.

''The California market is always so tight, any disruption could have consequences,'' says Neil Gamson, economist at the EIA.

''And there are a lot of similarities with what's going on in Chicago, because they are unique markets with their own gasoline, and that, in itself, makes for tight supplies.''

California, Chicago and Milwaukee are particularly vulnerable to shortages because they face tougher clean-burning fuel requirements than other parts of the country and have difficulty finding the special gasoline required to supplement shortages.

But with oil inventories tight across the USA, almost any major metropolitan area is vulnerable to a jump in prices, analysts say.

A fire at a major Kuwaiti oil refinery last month, for example, could show up in gas prices in the coming weeks.

''It was an all-export facility, and it tightens the entire supply picture,'' Kloza says.

This may be only the beginning. Analysts say that volatile gas prices are likely to become increasingly commonplace, as the appetite for energy in the USA grows, and refiners struggle to keep up with demand.

Meanwhile, hoping to bring targeted relief at the gasoline pump, Iowa Gov. Tom Vilsack Monday proposed giving each driver licensed in Iowa a $10 coupon toward the purchase of gasoline blended with ethanol.

The coupon would reimburse drivers for the 19-cents-per-gallon tax on 53 gallons of ethanol-blended fuel. If approved, it could arrive by the end of summer.

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-- Martin Thompson (mthom1927@aol.com), July 06, 2000