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In this case, the official, 'worst-case' scenario may not represent the actual worst-case scenario.
The U.S. Department of Energy, through its Energy Information Administration unit, has already released its projection for U.S. summer gasoline prices, and it expects the average U.S. price to peak at $3.60 per gallon by late spring/early summer. The current average is about $3.35-$3.38 per gallon.
Meanwhile, oil Friday flirted with yet another all-time high. Oil rose 73 cents to $115.59 per barrel, while wholesale unleaded gasoline gained 1 cent to $2.95 per gallon. On Thursday billionaire investor and oil industry guru T. Boone Pickens told Bloomberg News oil is headed for $125 per barrel.
The EIA does not expect much of a price rise beyond the $3.60 level because it expects U.S. consumers to cutback consumption to contain their transportation fuel bills amid the record-high prices. And, in fact, there's considerable evidence to support the EIA's demand projection: for the first time in more than a decade, weekly U.S. gasoline sales have declined on a year-over-year basis for more than two months.
Another factor: the unexpected
However, as independent energy trader Jim Dietz pointed out, the EIA's estimates are overlooking a variable that's all-too-often played a role in soaring gasoline prices during recent summer driving seasons: the unexpected.
A natural disaster such as a hurricane or even a tropical storm can markedly reduce gasoline flows across the nation, Dietz said. Further, an outage at a refinery, due to breakdown or a fire, would also force prices significantly higher, due to the U.S.'s barely-adequate refinery system.
"Ten or 15 years ago, an outage at a major refinery didn't move the gasoline market that much. But because gasoline supplies are so tight because we haven't increased refinery capacity that much over a decade, a fire or extensive repairs can cause a 20- or 30-cent increase in gasoline prices," Dietz said. "Add the hedge fund factor and you can see how an outage can really move prices."
Then there is the United States' quilt-like pattern of gasoline formulations. Dietz said, due to different environment requirements, states require different gasoline formulations for summer. The result is cleaner air, he said, but also a complex distribution system that requires different gasoline for California, than it does for, say, Kansas, he said. Producing different gasoline formulas increases refiners' costs, which adds to gasoline's price.
The bottom line regarding this summer's DOE $3.60 per gallon gasoline ceiling? Think of it as "a best guess," Dietz said.
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Reader Comments (Page 1 of 1)
4-18-2008 @ 4:11PM
CLINT said...
LISTEN UP -I HAD A THOUGHT WHILE SMOKING MY UNTAXED CIGARETT (YEA RIGHT) ...GRAVITY FED FREE ENERGY. SIMPLE CONCACSION WITH A TOWER SOME WEIGHTS ,CABLES ,PULLYS-GEARS, AND A GENERATOR .FREE ENERGY FOR THE DAYS WE HAVE NO WIND OR SUN OR HAHAHA OIL. .. OIL SUCKS GREEDY S.O,B
AND I GAVE MY IDEA AWAY FOR FREE, AT LEAST I CARE ABOUT THE POOR COUNTRIES WHO CANT FEED THIER CHILDREN!!!!
4-19-2008 @ 7:50AM
DAN BATTISTA said...
too many bush brothers involved in trade deals with china..wouldnt be surprised if they dont own the ships that bring the crap here...
4-18-2008 @ 4:22PM
Star Crazy said...
wow $50 for to fill up a tank.
4-18-2008 @ 5:16PM
william lindblad said...
It will peak and probably at the 4.00 mark. At that point the strain on budgets will result in less usage. Layoffs are now a daily news ritual and the thousands that will soon be out of work and on un-employment checks will not be joy riding. They won't be spending either. The economy is in trouble and this time, it is beyond government help.
4-18-2008 @ 6:53PM
mikydz said...
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www.paying2much4gas.mybpi.com
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4-18-2008 @ 7:11PM
Maysmax said...
Gas has been $4 in LA for over a month. Don't see any less traffic yet.
4-18-2008 @ 7:39PM
gumbo koontz said...
Gas is a controlled substance enforced by DEA. Addicts wil pay anything for gas even sex.... You will see...
4-19-2008 @ 6:55AM
Steve said...
A "clear and present danger" comes to mind. We've invaded other countries thru the years for doing a lot less then what the oil companys are doing to the "American" way of life now.
4-19-2008 @ 9:05AM
dennis said...
Why is our government so wrapped up with middle eastern oil? Russia has giant reserves of oil, but no pipelines. Canada has huge oil reserves in shale, but it has to be mined. China has massive oil reserves and so does the U.S. I just don't understand it all........conclusion: our government are wimps that won't stand up for it's citizens........therefore they suck and should be removed from office........but are the next office holders any better......I doubt it. Sad, very sad.
4-19-2008 @ 9:10AM
Janet said...
Gas goes up people stop and cut back on other things, money has to come from somewhere..
This is part of cause of recession.
Grocery store for example, I now bargain shop more than ever!
4-27-2008 @ 10:18PM
tommy said...
People will always complain, but no one does anything about it because they don't stick together..and these are who really have the Power to make things happen.. It's sad..lots of sheep and the leaders don't care because they profit from it.. We have the Numbers but what good is it when they sit around the Kitchen table or at work and talk about it...