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AAA Wants Congressional Probe Of Gas Prices

Average Price Climbing Towards $4

By Mark Huffman and Joe Benton
ConsumerAffairs.com

May 16, 2007

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A group representing U.S. motorists is asking Congress to investigate current gasoline refinery problems that have caused a painful spike in prices at the pump.

The American Automobile Association says lawmakers should look at the link between these supply shortages and rising oil company profits.

Gasoline prices hit record levels for the third consecutive day yesterday, striking $3.09, according to the AAA Fuel Gauge Report.

Prices are now above $3 in 31 states and the District of Columbia generating fears that $4 a gallon gasoline could be in the near future.

“We are concerned about the number and frequency of refinery outages this year in light of the large profits the industry has been reporting," said AAA Public Affairs Director Geoff Sundstrom, testifying before the Senate Committee on Energy and Natural Resources.

Sundstrom said the industry should be doing a better job of projecting and meeting demand. He says there is no apparent reason refiners should suddenly be having a problem completing this task.

Lawmakers convened the hearing to ask energy experts to explain why a number of gasoline refineries have suspended operations, at a time when they are normally gearing up for increased demand during the summer driving season. The bottleneck in supply has pushed pump prices to a record high.

Industry representatives in the west, where the supply problems have been most acute, say the real problem is refining capacity. Joe Sparano, president of the Western States Petroleum Association, told lawmakers more refining capacity is needed to meet rising demand.

A spokesman for the California Energy Commission blamed some of the problem on the annual switchover from winter gasoline to summer fuel, which is formulated differently. Motorists, however, were not swayed.

“Consumers have a disdain for exorbitant gasoline prices,” said Martha M. Meade, AAA Mid-Atlantic’s manager of public and government affairs. “This is the worst possible news at the worst possible time."

Meade said there is no real justification for the recent spike in prices, unlike last year's jump which was caused by Hurricane Katrina.

No Relief

The government's top energy forecaster told Congress that there will be no relief soon from the record high prices. The U.S. Energy Information Administration continues to blame strong consumer demand and dwindling stockpiles because of refinery breakdowns and slow imports for the skyrocketing prices.

The government warns that retail prices will climb higher as the summer vacation season continues.

EIA head Guy Caruso told Congress that there is still some wholesale price run-up that has not been passed along to consumers. Caruso declined to speculate how much higher gasoline prices will go.

"With refinery production expected to improve during the rest of May and import volumes increasing over the last few weeks, gasoline markets may ease somewhat, causing gasoline prices to recede from their current high levels," Caruso told members of the Senate Energy and Commerce committee.

Nevertheless, Caruso warned that the EIA expects gasoline markets to remain "fairly tight" this summer.

About 800,000 barrels per day in U.S. crude oil refining capacity is currently offline, which translates into about 400,000 barrels a day of lost gasoline production, according to the EIA. "It is an unusually high amount," EIA analyst Joanne Shores said.

AAA spokesman Geoff Sundstrom told the committee that his organization finds it "troubling" that the U.S is not able to supply enough gasoline to meet domestic demand.

Americans should be able to expect that those who refine oil into gasoline do a better job of anticipating demand growth, plan to meet that growth, and then make the necessary investments in plants, equipment and labor to provide the fuel at a cost that has some semblance of stability," Sundstrom said.

Senator Jeff Bingaman, the Democrat who chairs the energy panel, acknowledged that the U.S. economy remains “vulnerable to oil and gasoline supply disruptions and associated price increases."

The ranking Republican on the committee, Senator Pete Domenici, said there was no "silver bullet" that would slow the rise in gasoline prices this summer.

Prices High Everywhere

Prices are now above $3 in 31 states and experts predict more increases to come as consumers hit the road for vacations and other summer travel.

Mid-grade gasoline is selling for a national average of $3.26 and premium sells for $3.37.

The cheapest regular self-serve gasoline in the country is found in Boiling Springs, South Carolina for $2.65 and the most expensive gallon is on sale in Needles, California for $3.99.

One month ago regular sold for $2.79 and one year ago it sold for $2.88.

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