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CNN Live At Daybreak

Spike in Gas Prices May Not be Over

Aired March 26, 2002 - 05:17   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: The Shell-Pennzoil merger comes as gas prices in the United States took their biggest two week jump on record and our Kathleen Hays says hold onto your wallet because the spike in gas prices isn't over.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: They seem very high.

UNIDENTIFIED MALE: Really high?

UNIDENTIFIED MALE: Yes. They've jumped in, what, the last month or so, just jumped.

UNIDENTIFIED MALE: Yes, sir. Too high, getting too high.

UNIDENTIFIED MALE: Way too high?

UNIDENTIFIED MALE: Yes, sir. About three months ago we had some cheaper than this. Why is that, we don't know why it's too high.

KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): Painful but true, gas prices are spurting higher, up $0.14 in the two weeks ended March 22, the biggest two week rise on record. The U.S. economic recovery is one big factor fueling demand. Unusually warm winter weather is another. It's encouraging more driving. And the aftermath of the September 11 attacks is discouraging flying, putting even more drivers on the road.

Then there's OPEC. Crude oil prices are up about 30 percent in the last two months as the big oil producing nations agreed to cut production and traders worry about a possible military conflict in Iraq, a key global producer. So gas prices are up, but experts stress they're still a relative bargain. At an average of $1.38 a gallon in mid-March, gasoline is still well below the $1.50 average paid last September.

FADEL GHEIT, OIL ANALYST: What we are paying in real terms today is less than what we paid 10 years ago or 20 years ago. So those of us who are enjoying their new cars, they think of their parents or grandparents, that they were paying more for gasoline than what we are paying now.

HAYS: The worry is that prices could keep gushing higher. Domestic oil refiners are gearing up for specialized summer production runs of formulated gasolines mandated by the federal government and supplies are tight.

RED CANAVEY, AMERICAN PETROLEUM INSTITUTE: EPA requires us to purge all of that winter gasoline out of the tanks in order tog get the summertime gasoline in, which we must have in the tanks by May 1. So what you're seeing right now is the refineries are running full out. There's not much flexibility in the system as we take down time to get ready to produce that summertime gasoline, which is the high peak.

HAYS (on camera): Bottom line, oil analysts say prepare for more price increases. Even if the Middle East doesn't boil over and crude oil prices hold steady, the pinch at domestic refineries means consumers could be paying another $0.15 a gallon by early summer.

Kathleen Hays, CNN Financial News, New York.

(END VIDEOTAPE)

COSTELLO: So there you go.

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