Whether it's $50 to fill up your Prius or $130 for the Ford Expedition, $4-a-gallon gasoline is coming to a pump near you.
Fuel prices across the country are rising at a pace not seen since Hurricanes Katrina and Rita knocked out a third of the U.S. oil-refining industry in 2005. The reason: Gasoline consumption is climbing twice as fast as last year and will accelerate when summer travel begins around Memorial Day, while supply has been restricted.
"What we're surprised by is the increased demand," said James Mulva, chief executive officer at ConocoPhillips, whose refineries produce 56 million gallons of gas a day, enough to meet 14 percent of the country's needs. "Even though the price of gasoline is up, the demand is up," he said in an interview earlier this month.
Gasoline use nationwide now is rising almost 5 percent above the five-year average.
That's a result of population increases and U.S. economic growth, according to AAA, the nation's largest organization for motorists. The U.S. economy will expand at a 2.4 percent annual pace in the second quarter, up from 1.8 percent in the first three months, according to the median estimate of 74 economists surveyed by Bloomberg.
Americans are resigned to higher prices, said David Pursell, a principal with Pickering Energy Partners, a consulting firm in Houston.
"Last year, we had pump prices well over $3 for the summer and gasoline demand was up," Pursell said in an interview. "Would $4 gasoline cause demand contraction? I think it will, but I also thought $3 gasoline would."
At the same time, gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.
As a result, pump prices in the United States may increase to $4 a gallon from a current nationwide average of $2.87, especially if hurricanes threaten Gulf of Mexico refineries during the summer, said Peter Beutel, an analyst at Cameron Hanover Inc., a Stamford, Conn., firm that helps industrial consumers manage energy costs.
But even with the latest price hikes, spending on fuel in the country consumes only half as much household income as in the early 1980s, which means gasoline would need to reach almost $6 a gallon to have the same effect on the economy as in 1981, according to the Federal Reserve Bank of Dallas.
The increased pump prices will make winners of refinery owners such as ConocoPhillips, Valero Energy Corp. and Royal Dutch Shell Plc. Similarly, Sunoco Inc., the Philadelphia oil refiner, has seen its share price soar 28 percent since early January.
The increase in fuel costs threatens to quicken inflation and restrain consumer spending. An appreciation to $4 a gallon would add more than $10 for a driver who fills the 12-gallon tank of a Toyota Motor Corp. Prius. The owner of an Expedition, a Ford Motor Co. sport-utility vehicle with a 34-gallon capacity, faces an increase of almost $40.
Meanwhile, rising fuel prices make it less likely that Federal Reserve policy makers, who have cited inflation risks for the last year, will soon cut interest rates to spur economic growth.
Still, many Americans have no choice but to drive more, said Christopher Knittel, an economist who studies fuel consumption at the University of California in Davis.
"We live farther from our jobs than we did in the 1970s, and with the rise of dual-income households, we now have two people who drive those distances every day," Knittel said.
Storage tanks at U.S. refineries, terminals and ports now hold enough gasoline to cover almost 22 days of domestic demand - 8.2 percent less than the five-year average and the lowest for this time of year since the 1980s, Energy Department figures show.
Valero-owned filling stations in Denver and Colorado Springs, Colo., ran dry after a Feb. 16 explosion and fire shut the company's McKee refinery in Sunray, Texas. A day earlier, a blaze at an Exxon Mobil Corp. plant in Nanticoke, Ontario, slashed output, resulting in shortages and higher prices across eastern Canada.