Thursday, February 09, 2012

get ready for another round of pain at the pump: $4 (or higher) gasoline

USAToday | After rising 19 cents a gallon in the past four weeks, regular gasoline now averages $3.48 a gallon, vs. $3.12 a year ago and $2.67 in February 2010.

Prices could spike an additional 60 cents or more by May. "I think it's going to be a chaotic spring, with huge price increases in some places," says Tom Kloza of the Oil Price Information Service. Kloza expects average prices to peak at $4.05, although he and other industry trackers say prices could be sharply higher in some markets.

Rising prices are an annual spring ritual, largely because of seasonal demand. Refiners also switch from winter formulations to more expensive seasonal formulations to meet stringent environmental standards, which can tack on 15 cents a gallon, says Brian Milne of energy tracker Televent DTN.

This year's earlier-than-usual run-up is more about anticipation than current supply and demand. Last week, the Energy Department reported anemic U.S. consumption -- the lowest levels since September 2001. Domestic crude oil prices, now about $98 a barrel, are near six-week lows.

Renewed tensions in the Middle East are bolstering crude prices, while speculators are boosting futures contracts, betting on global supply disruptions and tighter refining capacity. Kloza notes that several U.S. and overseas refiners have experienced temporary or permanent closures.

So far, $4 a gallon has proven to be the upper limit consumers will pay. Last April, national prices peaked at about $3.98 a gallon. In 2008, a sharp run-up ended when prices hit an all-time average of $4.11 a gallon that summer.

"Higher demand, Iran, lost refining capacity are all potential problems," Milne says. "We'll get over $4 a gallon, but it's going to be tough to sustain that level. People will drive less."

Energy analyst Patrick DeHaan of price tracker expects prices to rise to about $3.55 a gallon by the end of February and peak around $4 by Memorial Day weekend.

"You could see prices in Chicago, Los Angeles, New York, Washington and other major metropolitan areas at $4.60 or higher," DeHaan says.

Lisa Margonelli, author of Oil on the Brain: Petroleum's Long, Strange Trip to Your Tank, says consumers will be vulnerable to rising prices until the U.S. develops alternative fuels such as natural gas.


John Kurman said...

I'm sorry but the phrase "supply and demand" when it comes to comes to petroleum products, or really anything nowadays, is laughable.

Seriously? Does anyone really think that? I mean, beyond the mental age of eight?

They (fill in the blank, the refiners and suppliers, etc.) aren't even trying to hide the manipulation. They just whip it out and "supply" it to the consumer... and then wipe it off on our curtains, just like in the storybooks.

CNu said... the great Oz has spoken....,

John Kurman said...

Ah yes, the All American fairytale. You can't cheat an honest man. Never give a sucker an even break. Never smarten up a chump. Pity they left out the most important line from the sample "Oh, no, I'm a very good man, just a... bad wizard".

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