By H. Josef Hebert
WASHINGTON – Pump prices for gasoline are rising with the temperature and likely will average about 25 cents a gallon more than last summer, the government estimates, but not enough to keep people home.
The Energy Department's new “seasonal outlook,” released Tuesday, projects that the price for regular-grade gasoline will average $2.62 a gallon, barring unexpected supply disruptions. Gasoline prices have soared since February.
Guy Caruso, head of the department's statistical agency, said prices at the pump are likely to increase another 10 to 15 cents a gallon in the coming weeks from the average of $2.68 a gallon nationwide last week. Recent increases in crude oil and wholesale gasoline costs are working their way through the system, he said.
The high prices are not expected to dampen demand during the April-September heavy driving season. Motorists are expected to use an average 9.4 million barrels of gasoline a day, or 1.5 percent more than last summer, according to the department's Energy Information Administration.
After peaking in May, Caruso said, prices should decline somewhat with an overall average from the April-September period of $2.62 a gallon.
Caruso acknowledged the EIA projections assume smooth sailing in a market that is prone to refinery disruptions and weather problems. He said he didn't think prices would jump to $3 nationwide but that spikes are “certainly possible in any given week” or in some areas of the country.
Retail prices of $3 a gallon already have surfaced at some gasoline stations.
Caruso said the main reason for the jump in gasoline costs is the higher price of crude oil, which accounts for 19 cents of the projected average increase this summer.
Refiners' shifting away from the additive MTBE also is putting pressure on supplies of corn-based ethanol, adding “a few pennies” of cost to motorists, he said. Refiners have said they will stop using MTBE on May 5 when the federal requirement for a clean-air oxygenate is lifted as part of an energy law enacted last summer. Many will have to substitute corn-based ethanol.
Gasoline costs already have increased 40 cents a gallon compared to a year ago. The average cost for regular grade gasoline nationwide was $2.25 a gallon in February.
The EIA cautioned that prices can vary by 27 cents to 50 cents a gallon among different regions of the country.
Some analysts said gasoline could return to $3 a gallon as hurricane season approaches. The markets are likely to be more jittery about the weather this summer in light of the widespread disruption of Gulf oil and gasoline production caused by hurricanes Katrina and Rita last year.
Gasoline soared to a national average of $3.07 a gallon – and considerably higher in some areas – after last year's hurricanes.
“News of any developing hurricanes and tropical storms with a potential to cause significant new outages could add to (price) volatility ... in the latter part of the summer,” according to the EIA report.
Caruso said high crude oil costs are the main reason for the gasoline price hikes. Light, sweet crude for May delivery rose 61 cents to $69.35 a barrel on the New York Mercantile Exchange by midday Tuesday in Europe. The contract rose $1.35 to settle at $68.74 on Monday.
The Energy Department's report said that crude oil is expected to remain high, averaging $65 a barrel for the year. But it said gasoline costs are expected to outstrip crude prices because of the additional cost of ethanol and compliance with new low-sulfur requirements.
Three of the biggest refiners – Valero Energy Corp., Exxon Mobil Corp. and Shell Oil Co. – said they will stop putting the additive into gasoline beginning May 5. Valero estimates that will shrink the nation's gasoline supply by 145,000 barrels a day.
The MTBE additive accounted for about 10 percent of gasoline volume in the areas where it is required to meet clean air requirements. That's about one-third of the gasoline sold.
Bob Dinneen, president of the Renewable Fuels Association, a trade group that represents the ethanol industry, told a recent Senate hearing that the industry will be able to meet ethanol demand even as refiners move away from using the MTBE.
On the Net:
Energy Information Administration:
www.eia.doe.gov
