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Pump Price Pain Percolates

The price of gas is displayed in a Omaha, Neb., gas station sign Wednesday, May 5, 2004. Gas prices are soaring, setting new records for the average price of a gallon of regular unleaded. According to AAA, the Nebraska average reached $1.862 per gallon, while the national average climbed to $1.844.
AP
U.S. gasoline prices rose by 10 cents per gallon in the past two weeks, the biggest jump since last August, an analyst said Sunday.

"Self-serve regular is now just over $1.93 and the weighted average of all grades is just over $1.96," analyst Trilby Lundberg told CBS Radio News.

Tight gasoline supplies and rising demand were responsible for the increase, analyst Trilby Lundberg said.

The average price of gasoline has broken record highs for two months straight, although when adjusted for inflation, the average price remains about 90 cents a gallon lower compared to the peak gas price in March 1981, Lundberg said.

Supply is the major problem.

"We need more than we have right now," Lundberg said. "This is getting tighter as we get into the summer driving season. Oil prices are nearly $40 per barrel, and that has added to the impetus of these gasoline price increases."

That $40 a barrel for crude is a 13-year high, tops since Oct. 11, 1990, which was the run-up to the 1991 Persian Gulf War.

Saudi Oil Minister Ali Naimi Monday urged OPEC to raise its production ceiling by 1.5 million barrels a day when it meets on June 3.

"It is certain that the kingdom believes that increasing the OPEC production ceiling is essential to keep supply and demand balanced," Naimi said in a statement.

He added the increase should "not be less that 1.5 million barrels a day."

Naimi's statement represents a shift in Saudi oil policy. Only in March the kingdom was reportedly the chief advocate of a decision by the Organization of Petroleum Exporting Countries to cut production in anticipation of a lower demand for oil during the spring and summer.

"OPEC seems unlikely to change its position on its official quota and produce more, at least not right now, and also, our demand is increasing not only seasonally, but also due to economic growth," Lundberg said.

Prices usually rise between March and May as refiners temporarily shut down their plants to prepare for the peak summer driving season, when special cleaner-burning blends of fuel are required.

"We get less gasoline out at a higher cost just when we need more of it," analyst Lundberg said. "Meanwhile, tighter regulations make it tougher for importers to bring in additional supplies."

At their meeting in Vienna in March, OPEC members decided to cut production by 1 million barrels a day, despite warnings by analysts that oil prices would surge and hit the psychologically-important threshold of $40 a barrel.

"There are big bets out in the market that the price might even hit $50 in the summer," oil industry analyst John van Schaick told CBS News Correspondent Serena Altschul.

"Self-serve regular is now lowest in Norfolk, Va., at $1.75, and the highest is in San Diego, at $2.25," said Lundberg.

Despite the rising prices, drivers around the country haven't changed their habits. Last month the demand for gasoline averaged 9.1 million barrels a day — a 4 percent increase from last year.

"Well, at this point, I'm riding around on fumes, so I don't have much of a choice," smiled one driver.