Soaring Gas Prices Nearing Record

U.S. gasoline inventories are at the lowest levels in nine months, and prices are approaching record highs. The short supplies are to blame for the spike in prices, reports CBS News Correspondent Cynthia Bowers.

And the results are becoming clear to motorists at gas stations all across the country.

Californians, already suffering from recall fever, are now coming down with "gas-tritis" at the pumps as gasoline prices soar.

"I saw the guy out there changing the prices this morning. I thought it was ridiculous," says Tristan Cerenzie, a California resident.

And many fellow drivers share her reaction.

In San Diego, prices have jumped a quarter in less than two weeks. At some stations, regular gas hit $2.44 per gallon.

"It's outrageous. I only get .. What? ... three gallons pumping seven bucks," says Than Vo, a California resident.

And it's not just Golden Staters feeling gouged.

Next door, Arizona Gov. Janet Napolitano toured the damaged pipeline blamed for shortages so acute desperate drivers waited for hours only to pay a premium -- as much as $4 a gallon.

Prices in the Midwest and East spiked almost as soon as the blackout hit and refineries went off-line.

All in all, today's national average is $1.65 per gallon, as compared to a $1.40 this time last year.

And frenzied buying in the futures pit means prices haven't topped off just yet.

Analysts say investors are skittish about unrest in Liberia and Venezuala, both major oil exporters, and continuing problems in Iraq, which used to be one.

"I think it's pretty much guaranteed we're gonna break through that national record (of $1.72 a gallon for regular grade) in the next ten days," says Tom Kloza of Oil Price Information Service.

It's particularly painful because by late summer demand usually slides and prices are on their way down, not up.

"The oil companies are going to try and make their money as best they can and this is an opportunity for them to raise the prices," says Jerry Long, an auto club member.

There's no question the oil companies are making money— as much as 20 or 30 cents on every gallon of gas they sell, reports Bowers.

"Refining margins have swelled to numbers that we've actually never seen," says Kloza. "We never even saw these numbers back in the seventies when everybody was Kung Fu fighting."

But as quickly as they are going up, experts say the high prices shouldn't last long. They should start heading down soon after Labor Day.

Arizona's Napolitano says she's satisfied the closed pipeline's operator is doing all it can to get gasoline flowing to Phoenix again but fears the company won't be ready if another pipeline break occurs.

Officials of Kinder Morgan Energy Partners of Houston have not given her a satisfactory answer about what backup plans are in place, Napolitano said Friday. The pipeline that broke was installed in 1955, she said.

"This pipeline was installed in 1955, and while Kinder Morgan has now the permission from the federal government to install a new, larger pipeline, that project won't be done until the end of 2005 or early 2006," she said.

The pipeline, which supplies a third of Phoenix's gas, burst July 30 in Tucson and was reopened Aug. 1, but safety concerns prompted the company to shut it Aug. 8, causing a break in the supply chain.

Many gas stations in Phoenix have been without fuel, and those that remained open have seen long lines and escalating prices. The situation has eased in recent days with more supplies coming in.

Asked to respond to the governor's comments, Kinder Morgan spokesman Larry Pierce would only say that the company "is also working and looking at other options" for fuel distribution. He would not, however, be specific. "I am not going to speculate," he said.