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Gas: pumped for summer
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July 4, 2000: 10:24 a.m. ET
Experts see prices remaining fairly high for most of the vacation season
By Staff Writer Rob Lenihan
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NEW YORK (CNNfn) - Now is the summer of our discontent -- with the price of gasoline.
As the summer vacation season shifts into high gear, the cost of fuel is doing the same. A gallon of regular unleaded gasoline is going for about $1.65 this week, according to AAA, up substantially from an average of $1.14 this time last year.
Reasons for the revved up prices litter the landscape like wrecks in a multi-car pile-up, with the White House, OPEC, reformulated gasoline and the oil companies all getting caught in the headlights.
As the finger-pointing 500 roars around Capitol Hill, experts say car owners won't likely get relief at the service station anytime soon.
Drive, they said
AAA spokesman Jerry Cheske said the good news is that the runaway price spikes that plagued the upper Midwest have eased up and gasoline in Detroit, Chicago and Milwaukee have fallen below $2 per gallon.
During the summer, he said, gas prices "are not going to go down in any significant way" from the national average of $1.65 per gallon.
"We'll have to wait and see what happens in the fall," he said.
Despite increased prices, Cheske said there is no evidence Americans are cutting back drastically on their travel plans.
"We don't see the sense of urgency we've seen at previous times," he said. "People are more accepting. Plus the economic situation is better than other periods."
Cheske said gas is still a bargain in terms of inflation. By 1981 standards, prices would be up to $2.50 a gallon.
Speaking before the House Committee on Commerce recently, Mark Brown, AAA Executive Vice President for Association and Club Services, said despite high gas prices, 32 million Americans will travel by motor vehicle over the July 4th holiday. This is up nearly 4 percent over the previous year, Brown said, and is the greatest one-year jump for this holiday since 1993.
"A family driving 1,000 miles should be prepared to spend an additional $25 over and above last year's fuel prices to make the trip," Brown said in a news release. "That's hardly enough to cancel that long-sought vacation."
AAA said it did notice a subtle shift in travel plans, including taking trips closer to home, choosing more direct routes, and redirecting vacation money from high-priced hotels and restaurants to lower cost accommodations and fast-food chains to offset higher fuel costs.
The Energy Information Administration (EIA), the U.S. Department of Energy's statistical agency, said prices will average about $1.50 per gallon for the summer driving season. The agency expects a drop in gasoline prices, assuming the declining crude oil price path holds.
Flag the tax?
With the high price of gasoline, this probably isn't the best time to own a sport/utility vehicle. If your road monster comes with a 38.5-gallon tank, it will cost you about $64 to say "fill 'er up."
Some political leaders have called for the suspension of federal and state gas taxes as a way of easing the spiraling gas prices. Sen. Trent Lott, R-Miss., said federal fuel taxes, along with state excise taxes, account for more than 25 percent of the price of gasoline.
The Road Information Program (TRIP), a Washington-based research group, has a different view, warning that a tax suspension would only cost consumers more money as road and bridge repairs and improvements go undone.
The average driver pays $126 a year in additional vehicle operating costs when needed road repairs are not made, TRIP said, and motorists pay $23 billion a year in extra vehicle repairs, tire wear and operating costs to drive on roads needing repair.
Also, TRIP said, traffic congestion costs motorists in the nation's top 20 urban areas an average of $948 per motorist per year. Congestion in the top 75 urban areas costs drivers an additional $72 billion a year, resulting from extra time spent in traffic congestion and extra fuel consumed while sitting in traffic.
RFG S.O.S.
Reformulated gasoline (RFG), designed to burn cleaner, has gotten some of the blame for increased gas prices. About a third of the gasoline sold in the U.S. must meet federal reformulated gasoline specifications, the EIA said.
The price premium for Phase II reformulated gasoline has averaged about 8 cents per gallon in April, but the agency warned there is new uncertainty in RFG pricing.
In March, the Federal Circuit Court upheld the reformulated motor gasoline patent of Unocal Corp. (UCL: Research, Estimates), confirming an earlier district court decision award of 5.75 cents per gallon against six refiners that had infringed on the patent in California.
Last month, the company's vice president told a congressional delegation that Unocal's patents for cleaner-burning gasoline were not a factor in the recent increases in Midwest gas prices.
Where to?
The Petroleum Industry Research Foundation (PIRF) reported that Chicago and Milwaukee, both RFG areas, saw significant price increases between March and June of this year. The supply problem occurred because of the insufficient build-up of the new Phase II product, PIRF said.
DOE statistics show the average price of gasoline fell in the most recent week at a faster rate in the affected cities than in the nation as a whole, the foundation said, noting that retail prices in Chicago and Milwaukee should continue to decline.
There may also be some relief from the Middle East after Saudi Arabia said late Monday that it will increase production by 500,000 barrels a day.
Although the summer's immediate gas problems are easing, the foundation said, they do point to serious regulatory issues.
"None of the individual problems contributing (to) the national, and especially local, gasoline price run-ups were major in and of themselves," the foundation said. "However, they came together in the context of a tight global oil market. This condition may persist for some time." 
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