Group Predicts Return of Gas Lines

In a report strongly criticized by the oil industry, a consumer group predicted Tuesday that gasoline prices would increase as much as 10 cents per gallon this summer and suggested that drivers would have to wait in gas lines as supplies fail to keep up with demand.

Buyers Up, a division of the Ralph Nader-founded consumer group Public Citizen, argued that supplies would run short as soon as August because of overtaxed refineries, tight gasoline imports and reduced inventories.

“We anticipate there being a tight gasoline supply situation this summer, given . . . (that) the gasoline supply is less reliable than in past years (and given) high demand,” said Christopher Dyson, research director with Buyers Up and principal author of the report. “We see price increases, possibly even shortages this summer.”

But industry observers and oil company economists dismissed as invalid the conclusions in the report released by the Washington-based consumer group.

“There is no reason for consumers to be concerned about the adequacy of gasoline supplies for the summer driving season,” barring an unforeseen disaster that disrupts supplies, said Edward Murphy, director of finance, accounting and statistics with the American Petroleum Institute, the industry’s main trade association, based in Washington.

Gasoline prices have already risen as much as 10 cents a gallon in the wake of the March 24 Exxon Valdez oil spill in Alaska, which reduced oil supplies to the West Coast for several days by about 2 million barrels per day. The increases were partly attributable to actions by independent refiners.

For the summer, analysts said any price increases would be on the order of 4 or 5 cents a gallon. Locally, wholesale gasoline prices ranged Tuesday from 91.8 cents a gallon (including tax and freight) to a little more than $1 a gallon.

“Inventory levels (of gasoline) on the West Coast are at 29.6 million barrels, similar to last year,” said Wayne Ederer, a pricing analyst with Chevron U.S.A. in San Francisco. “I think the statement that you’ll be seeing gas lines is totally false.”

Oil company officials said gasoline refineries on the West Coast now run at about 90% capacity, while growth in demand continues to outpace the rest of the country.

The report cited government figures and other studies to support its conclusions:

* Refinery production will be able to supply only 92% of the total 1989 gasoline demand, the lowest since deregulation in 1981. In March and April, U.S. refinery production met only 90% of demand, compared to 92.8% in 1988.

* Demand for gasoline in 1989 will be 7.41 million barrels per day, a record high. In the first four months of 1989, the gasoline consumption rate was 7.37 million barrels a day.

(On the West Coast, demand for gasoline should average about 1.3 million barrels a day during summer months, compared to about 1.25 million in the same period last year, said Lew Blackwell, general manager of Western Region supply for Chevron U.S.A.)

* Imports of gasoline may be curtailed by more stringent government vapor regulations and increased demand in exporting countries.

* The oil companies have an incentive to keep supplies tight, because it results in higher prices and profit margins.

But industry officials and analysts, while agreeing with many of the trends cited in the report, took issue with its conclusions.

For one thing, higher pump prices may slow growth in demand for gasoline, said Tom Wallin, executive editor of the industry newsletter Petroleum Intelligence Weekly.

For another, although refineries are running at near capacity, improvements in plant operations have improved their efficiency, analysts said.

Supplies of gasoline from California refineries would not fall as a result of more restrictive federal vapor regulations because state refineries already operate under more stringent restrictions, company officials said.

On the West Coast, refineries should produce about 1.2 million barrels a day of gasoline, said Chevron’s Blackwell.