U.S. pump prices have hit record highs, topping  the $2-a-gallon mark in Chicago and California
and spurring talk of a possible $3 a gallon sometime after the peak driving season begins on
Memorial Day. 

"It's ridiculous," Cedric Norwood said Monday as he fueled up in downtown Chicago. "The oil companies are going to suck us dry." 

A recent Federal Trade Commission report on last summer's price run-up found no evidence of oil industry collusion, and no blame has yet been laid for this year's increase, which is tied to tight supplies. U.S. motorists still pay far less than their counterparts in Europe and Asia. 

Nonetheless, pump rage is in full blossom as prices hit unprecedented levels -- especially in smog-prone parts of the Midwest and West that are required to use cleaner, "reformulated" gasoline in summer. Recent fires at Tosco refineries in Los Angeles and Wood River, Illinois, threatened those supplies and sent prices surging. 

However, the Organization of Petroleum Exporting Countries ( OPEC ) will probably increase its production quotas by the end of the year, possibly by enough to erase the 2.5 million-barrel-a-day cut it made earlier this year, Saudi Arabia's oil minister Ali Naimi said Monday in interviews with CNBC and The Wall Street Journal. 

Depending on world economic growth, Naimi said, OPEC might go beyond restoring that cut. 

U.S. gas prices reached an all-time high in the past two weeks, not adjusting for inflation, according to the Lundberg Survey of 8,000 service stations. Overall, the average price covering all grades of gasoline increased 8.58 cents to $1.76 a gallon as of May 4. ( Gosh, maybe he should come to Los Angeles, seems to me it was 8.58 cents per gallon per week in the month of April )

Factoring in inflation, that's a full dollar less than the average cost of gasoline in March 1981. But don't tell that to drivers in Chicago, which has the nation's most expensive gasoline. "This is crazy -- $2.34 for a gallon of gas?" said one Chicagonian, who only partially filled her Nissan Stanza. "We can't even afford to pump gas anymore. We're going to have to get on our bicycles." 

Even the White House alluded to the possibility of $3-a-gallon gas. White House spokesman Ari Fleischer said Monday that President Bush has not supported calls to repeal or cut the 18.4 cents-a-gallon federal gas tax and won't act even if prices break $3. 

"Price controls will make the prices go higher and make people wait in lines," Fleischer said. 

U.S. refineries are being pushed to the limit to try to keep up with demand, and aging infrastructure has resulted in several breakdowns -- no new U.S. refinery has been built in 15 years. ( Hmmmm, seems to me this is a very similar situation that is, and has been, going on in California with the Electricity Issue )

But there are hopeful signs in the most recent oil industry data, which showed gasoline supplies creeping higher. 

"The worst may already be over because refiners are getting caught up" with supplies, said Phil Flynn, senior energy analyst for Alaron Trading Corp. in Chicago. "The bad news for consumers is we don't have one extra drop of gas to fall back on. 

"If one more refinery goes out of service, it could have an impact on consumers of as much as 75 cents a gallon." 

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