Gasoline Costs Jump Nearly 13 Cents a Gallon

In some regions of the country, $2-a-gallon gasoline is back.

In San Francisco, the average price of a gallon of regular gasoline is $2.04. In Chicago, where average prices have jumped 41 cents in a month, motorists today paid $2.09 for a gallon of regular.

"By the time I'm finished filing up my car, it'll be almost $40," said one motorist at a Chicago service station.

Another added: "I'm scared to death about it. I wish I could walk everywhere."

The weekly Lundberg Survey found that the price of filling up has increased by 13 cents a gallon in the past two weeks, to a nationwide average of $1.67 for a gallon of regular. And gasoline prices typically continue rising into Memorial Day, the launch of the summer driving season.

A U.S. Gasoline Market Phenomenon

"If this year's summer driving season is as busy as last year's, with gasoline prices already 15 cents higher than they were this time last year, we could see appreciably higher prices," said Robert Sinclair of the American Automobile Association.

Analysts say at the heart of the problem is a basic imbalance between supply and demand. While there's plenty of crude oil around, at reasonable enough prices, there are not enough refineries to process it. And all the while, demand for gasoline keeps growing.

"The problem is, we have not built a refinery in the United States in a quarter century," said Larry Goldstein of the Petroleum Industry Research Foundation. "So as demand grows and demand is not capable to keep pace with demand, you get to a point where you have bottlenecks develop. And that's the point we're at."

Normally, the industry maintains extra inventories to relieve such bottlenecks. But inventories are especially low right now.

Beginning June 1, stations are required by law to sell a cleaner-burning gasoline, one made with antismog additives. As refineries get ready to produce that blend, they're cutting back on making the winter blend to avoid having excess that can't be sold until winter.

Some consumer groups, the American Automobile Association among them, have called on the federal government to relax those summer/winter standards, hoping to avoid these price spikes. But that's not a popular idea with environmentalists, who think the refineries should do a better job of managing their inventories.