Gas Prices Creep Up <I>Again</I>

Gasoline prices
Gas prices in Chicago are closing in on two bucks a gallon again. The national average is already $1.54 and the summer driving season is still two months away.

And if this dredges up painful memories of last summer's scorcher at the pumps, the reasons why gas is up again are going to sound like a broken record.

"Refiners simply don't have enough capacity to make as much gasoline as the U.S. consumes under these new environmental regulations," explained Merrill-Lynch analyst Mike Rothman.

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Refineries and regulations, that's what they said last year. Which means despite complaints from consumers and Congress, and even an investigation by the Federal Trade Commission, motorists are stuck in the express lane to high prices.

"This is a very long-term business, it costs hundreds of millions of dollars to make additions to a refinery and you need to look at a 10 or 20 year planning horizon," offered Red Cavaney of the American Petroleum Institute.

Changes may take time, but profits can seemingly turn on a dime.

Exxon Mobil's operating income in the last quarter of 2000 was up 89 percent, BP Amoco's nearly 93 percent and Texaco's 127 percent. Refiners are also cleaning up: UDS saw earnings increase 310 percent and Sunoco nearly 7 fold.

Analysts say the distributors and drivers are the ones running on empty — and the only bright spot is courtesy of OPEC.

"If we look at what happened with oil prices last year versus this year, the one big difference is not with refining but the fact that crude oil prices are lower," said Rothman.

If it weren't for that, gas would be selling for l0 to 12 cents more than it is now. But the bottom line is all it would take is a problem with a pipeline, or power disruption to a refinery, and this summer's prices could make last summer's look like a bargain.

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