EIA warns US gasoline prices may be volatile this summer

The US Energy Information Administration said Friday that gasoline prices could be volatile this summer, although the agency expects little difference from last summer�s $1.50/gal average. It said regional supply problems could cause significant price volatility, especially in the Midwest and on both coasts.

Mar 30th, 2001


By Maureen Lorenzetti
OGJ Online


WASHINGTON, DC, Mar. 30�The US Energy Information Administration told a congressional panel Friday that gasoline prices could be volatile this summer, although the agency expects little difference from last summer�s $1.50/gal average.

John Cook, the petroleum division director, said, �EIA projects that prices at the pump will rise modestly as this year's driving season begins. While EIA expects little difference from last summer's average price of $1.50/gal, gasoline inventories going into the driving season are projected to be about the same or even less than last year, which could set the stage for regional supply problems that once again could bring about significant price volatility, especially in the Midwest and on both coasts.�

Cook testified before the House Subcommittee on Energy and Air Quality. Chairman Joe Barton (R-Tex.) held the hearing to get an overview on petroleum markets and receive input from industry on ways government can encourage domestic production and refining.

�We suffer the ups and downs of market supply,� Barton said. �And consumers must bear the mood swings of a world market.�

To help modulate energy prices, Barton said his committee soon will draft a comprehensive energy bill that will seek to boost domestic supply and encourage conservation. He did not offer a timetable for completion of the bill. Wide-ranging energy bills have been introduced in the Senate.

Stephen D. Layton, president and CEO of Equinox Oil Co., reiterated the case that US independents have been making the past several months on Capitol Hill. He said expanded tax credits for marginal wells are needed to shore up domestic production.

�They [independents] are different from the majors in that all their revenues come from drilling and selling oil. They are much more susceptible to price.�

The White House has signaled a reluctance to rely on new tax breaks for industry, although that is one of the issues an interagency task force is studying. The task force will issue its recommendations in April.

Both producers and refiners said government has a role to play in ensuring the health of the US oil business.

Gregory C. King, vice-president and general counsel of Valero Energy Corp., cautioned that government should not junk its clean fuel regulations.

�You do not change the rules of the game in the middle of the game. Retroactive reinterpretation of rules wastes scarce capital.� King added that if the White House does opt to pull back some environmental fuel rules, the federal government should compensate refiners for their stranded costs.

Independent marketers did not endorse that view. However, a spokesman for the Society of Independent Gasoline Marketers called on the subcommittee to consider drafting clean fuel regulations that set performance goals instead of specific formulas for refiners.

�While we are not suggesting the government bail out refineries which are not economically viable, we believe the economic viability of a refinery should not be determined by the timing of the implementation of a new environmental regulation. If such regulations render a refinery nonviable, then adjustments to that regulation should be considered,� said Tom Robinson, CEO of Robinson Oil Corp.

Some of the Democrats on the subcommittee agreed with a National Resources Defense Council witness who said environmental rules by themselves are not to blame for high energy costs.

�This hearing is self-serving,� complained Rep. Ed Markey (D-Mass.). �It�s filled with industry and we need to look at the whole picture, including ways to cut demand.�

Barton dismissed those criticisms, saying he will seek input from �both sides of the aisle� in drafting his upcoming bill.

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