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    Fuel Prices Expected to Rise

    U.S. gasoline supplies shrank by 6.7 million barrels in the past week.

    As the Labor Day holiday weekend approaches, U.S. gasoline supplies are shrinking and refineries are reporting snags, a possible harbinger of higher prices at a time when fuel costs are already climbing in parts of the country.

    According to the American Petroleum Institute (API), U.S. gasoline supplies shrank by 6.7 million barrels in the past week to 196.2 million barrels, or 3 million barrels below year ago levels.
    Analysts told the Associated Press the shortfall will probably cause prices to rise as the summer driving season
    winds down.

    "If you're a refiner, it's a glorious end to the driving season," said Tom Kloza, director of Oil Pricing Information Service, a Lakewood, N.J., publisher of oil industry data. "If you're a consumer, you're probably annoyed.

    Citgo Gets Break
    The Environmental Protection Agency (EPA) this week temporarily relaxed standards on the gasoline produced and sold by Citgo Petroleum Corp. in the Midwest in an attempt to alleviate a recent price spike in the region.

    In other parts of the country, particularly in the West, the wholesale price of gasoline has been rising fast on the spot market and analysts said it is only a matter of time before retailers pass along those costs at the pump.

    Since Aug. 1, the wholesale price of gasoline has risen roughly 50 cents per gallon in Los Angeles and more than 10 cents a gallon in Houston, the report said.

    Under the agreement with the EPA, Citgo will be allowed to market a blend of gasoline to retailers in Chicago and Milwaukee that meets less stringent air quality requirements for the remainder of the summer driving season.

    In exchange, the EPA said Citgo will have to pay the Treasury Department about 14 cents for every gallon it sells of the lower grade gasoline, which is cheaper to manufacture than the summer-grade product.

    The move is intended to help Citgo make up for a production shortfall that began Aug. 14, when a fire forced the Tulsa, Okla.-based company to close its 160,000 barrel-a-day refinery in Lemont, Ill.

    Citgo will be allowed to sell gasoline with a less stringent vapor pressure standard, which is intended to reduce the release of volatile organic compounds, or VOCs, into the air. VOCs contribute to the formation of smog during warmer months, the report said.

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