Published January 13, 2015
For Chicago cab driver Adam Kowski, rising gasoline prices are taking a toll.
``I am losing my money, my hair and my patience because of gas prices,'' Kowski said, who spends $26 a day at the pump. ``It's a taxi driver disaster.''
With the start of the busy driving season still more than a month away, the average price of gas is already up sharply. So is the frustration of many drivers, who wonder why the annual ritual has begun so early.
For this time of year, supplies of conventional gasoline are tighter than at any point since the federal government began keeping track in 1963. Rising demand and an inadequate number of refineries have contributed to the squeeze.
Motorists in California and in Midwestern cities will pay the most at the pump in the coming months because of shortages of a blend of gasoline that produces less smog, which is required by the federal government during the summer.
Americans living in the Southeast are somewhat buffered from price spikes thanks to fewer taxes and plenty of refineries nearby, while consumers on the East Coast can expect moderate price increases for the opposite reasons.
The average price of gas, including all grades and taxes, is $1.66 a gallon, up 12 cents in the past two weeks, according to data released Monday afternoon by the Energy Information Administration, a division of the U.S. Department of Energy. A year ago, the average was $1.48 per gallon.
Analysts believe once the peak driving season arrives, the nationwide average could rise by another 20 cents, with prices reaching $3 a gallon in California and in cities such as Chicago and Milwaukee.
``Gasoline inventories in this country are at a level associated with the end of the driving season not the beginning of it,'' said John Kilduff of Fimat USA in New York.
As a result, Kilduff said, ``any kind of refinery snag will be magnified.''
Over the winter, when gasoline inventories are typically replenished in anticipation of summer, major refiners were instead focused on producing enough heating oil, whose prices soared. Now many of those refineries have been forced out of service to take care of maintenance that had been put off to deal with the heating oil crisis.
As of April 13, the United States' inventory of motor gasoline was 192.8 million barrels, the lowest amount in mid-April since the EIA began compiling such data nearly 40 years ago.
Demand has been rising by roughly 3 percent a year for the past few years, pushed by a strong economy and the growing popularity of less fuel efficient cars.
``The gasoline market right now is a nightmare,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
That nightmare, the industry contends, has been created, in part, by environmental regulations that make it difficult to build refineries. No new refineries have been built in the United States for more than two decades.
But Silliere and other analysts believe major oil companies simply have made a bottom-line decision to forego building new refineries and instead focus on drilling for oil and natural gas, which offers bigger profits.
``No doubt about it,'' Silliere said, adding that ``their feeling is that 'we're better off in the real core of this business, which is drilling.' ''
Adding to the price rise are laws requiring major cities during the summer to use cleaner-burning reformulated gasoline, or RFG - a labor-intensive product that is also more expensive than conventional gasoline because it requires separate storage and distribution channels.
As it was last summer, RFG is particularly scarce - and expensive - in Midwestern cities such as Minneapolis, Chicago and Milwaukee, which are far removed from the country's major refineries on the East Coast and in Texas.
The high price of natural gas also played a role in today's high price of gasoline. MTBE, an additive used to make some reformulated gasoline, is made from methanol, a derivative of natural gas.
So when the price of natural gas soared to nearly four times its historical average, several refineries making MTBE shut down, according to Larry Goldstein, president of the industry-funded Petroleum Industry Research Foundation.
Those shutdowns, which took place during December and January, reduced daily output by 60,000-80,000 barrels, roughly one-third of the nation's production, according to Goldstein.
The reduction has been especially bruising on California, which uses more MTBE-treated gasoline than any other state.
``It really shows how interconnected the markets are,'' Goldstein said.
Even rising gas prices haven't seemed to quell Americans' appetites for gas-guzzling sport utility vehicles.
Last year in the United States, consumers snapped up 3.5 million new SUVs domestically, up 9.3 percent from the 3.2 million sold in 1999, according to Autodata Corp., a Woodcliff, N.J.-based automotive marketing consulting firm. Put another way, SUVs last year accounted for one in every five new vehicles sold.
Al Arauz, 41, of Baldwin Park, Calif., said he feels basically powerless when prices rise at the pump.
``There's no choice: You have to pay what they charge you,'' said Arauz, as he pumped $34.89 worth of 89-octane gas into his Nissan pickup truck at a downtown Los Angeles station.
``If prices continue going up, I'm going to buy the cheaper gas, though,'' Arauz added.