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Retail Gas Prices Reach All-Time High, AAA Says

Reuters
Monday, 14 May 2007 | 11:35 AM ET

American motorists are paying record-high prices at the gas pumps in the run-up to summer vacation season as operating problems at the nation's oil refineries cut deeply into fuel stockpiles, travel and auto group AAA said.

U.S. average gasoline prices climbed to a record-high average of $3.073 a gallon Monday, narrowly exceeding the previous peak hit after hurricanes knocked out refineries on the Gulf Coast in 2005, according to the daily survey of 85,000 service stations.

This is the third year in a row that pump prices have climbed above the $3-a-gallon mark as a continued crunch in domestic fuel production capacity mingles with rising demand and high prices for crude oil.

Gasoline prices are up about 50 cents since March, with energy experts blaming this year's spike on planned maintenance and breakdowns at U.S. refineries struggling to meet tough environmental fuel regulations.

"Because oil prices today are at least $10 less expensive per barrel than when gasoline prices previously exceeded $3 a gallon, almost all of the price pressure on gasoline can now be attributed to America's continuing -- and increasing -- inability to supply enough refined gasoline to the marketplace," AAA said in a statement earlier this month.

U.S. gasoline supplies dropped about 15% since February amid low production from refineries, according to the U.S. Energy Information Administration.

The surge in gasoline prices has sharpened scrutiny of the oil industry as it rakes in sterling profits. The U.S. Senate's top Democrat last week accused big oil companies of curbing fuel production to keep returns high.

"It's outrageous ... Isn't it interesting every year about this time, a refinery goes down for repairs," said Senate Democratic leader Harry Reid of Nevada.

The administration of President George W. Bush has offered oil companies incentives to build new refineries to meet growing domestic demand -- but companies have instead chosen to expand capacity at existing plants.

A new refinery has not been built in the United States for about 30 years.

Bush is also seeking to encourage use of biofuels, including ethanol and biodiesel, as a way to reduce dependence on foreign oil.

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