Gasoline prices nationwide are on average sharply higher following last month's Alaskan oil spill, partly because of factors that already were inflating prices when the disaster occurred.
An American Automobile Association survey released Friday indicated retail prices for self-serve unleaded gasoline as of Wednesday were up an average of 12 cents a gallon to $1.115 since Easter weekend, March 24-26.The survey showed most of the increase occurred after the March 24 spill, which resulted in the temporary closing of the oil port of Valdez. In California, unleaded gasoline has risen 11 cents, in Iowa and Kentucky, 15 cents and in Texas, more than 10 cents since then.
The rise in retail prices closely followed a jump in wholesale prices - even though there generally was a lag - as service station companies scrambled to keep up with their own costs of supply and ensure that they had enough gas to meet demand.
"People were afraid that the crude supply would cause a shortage of gasoline going into the summer driving season," said Ken Miller, analyst with the petroleum consulting firm of Purvin & Gertz Inc. in Houston.
"There was a fairly rapid pass-through because of the presumption of a fundamental shortage or a perceived fundamental shortage, as a result of lost crude supplies," Miller said.
Gasoline prices were headed up even before the disaster, particularly on the West Coast where inventories were low due to refinery slowdowns caused by mechanical problems and annual maintenance.
In the two weeks before the spill, unleaded wholesale prices in Los Angeles had risen by more than 10 cents a gallon to an average of 72 cents, according to data compiled by the newsletter Platt's Oilgram Price Report.
After the March 24 spill, Western wholesale prices surged more than 28 cents due to a combination of factors, including the temporary shutdown of oil shipments through Valdez from the Prudhoe Bay fields, which supply 60 percent of West Coast refiners.
The perception that the spill-related supply squeeze would produce shortages at the onset of the driving season also helped boost prices as wholesalers began stockpiling and West Coast motorists rushed to fill their gas tanks, observers said.
Nationwide, wholesale prices also rose - pushing pump prices higher - as expectations spread that a supply squeeze in the West could create higher demand for crude from the Gulf of Mexico and foreign producers, which account for the bulk of the nation's oil.
Alaska supplies 25 percent of U.S. oil consumption. Just over half of that amount goes to West Coast refineries, although states like Texas and areas of the Midwest and East Coast also depend on Alaska crude.
But price increases were more dramatic on the West Coast because of additional refinery problems, observers said.
Gary King, supply manager for Benito Tank Lines, a large West Coast gasoline wholesaler, said some West Coast refineries were shut down for repair, while others were operating with low inventories and had to scramble for supply when the prospect of an Alaskan crude squeeze developed.
Annual refinery tune-ups had further reduced capacity and available capacity was tightened somewhat as refiners prepared their facilities to meet federal regulations requiring higher octane levels.
Andrew Lebow, an analyst with E.D.&F. Man International Futures Inc., said West Coast refinery capacity was down to 73 percent in March from 84 percent in early January.
Val Ferrin, western supply manager for oil refiner-distributor Flying J Inc. of Brigham City, Utah, said one refiner raised prices by 10 cents a gallon in 24 hours.
"At some point in time that has to transfer to retail," Ferrin said.
Further price pressure has come from the 60 percent rise in crude prices over the past six months as worldwide production fell.
But some observers predicted gas prices could decline once oil operations in Alaska stabilize and as western states look to other suppliers for their needs.
"It's a short-term situation. It won't last longer than the next couple of weeks," said King.
Prices also might ease as perceptions of a shortage diminish. The U.S. Department of Energy concluded this week that the dramatic rise in West Coast prices was caused by "market psychology" and did not warrant emergency use of the nation's Strategic Petroleum Reserve.
"We expect prices to go back down soon," said Claudia Barker, spokeswoman for the California Energy Commission. "We have additional crude oil supplies coming in and product supplies that we normally wouldn't have."
California wholesalers bought 2 million barrels of gasoline from Ecuador, China and Kuwait, although the state normally doesn't import refined crude, Barker said.
Chevron U.S.A., the West Coast's largest refiner, purchased 1 million gallons of foreign gasoline on the spot market to alleviate possible shortfalls, said Mike Libbey, Chevron spokesman in San Franciso.
Since the spill, Chevron has raised its wholesale price for unleaded gasoline by 7 cents to 77 cents a gallon, Libbey said.