Summer Gas Prices Could Hit $2.50 a Gallon
Gas prices could surge as high as $2.50 a gallon in areas that use reformulated gas, according to a March 7 story by Sara Nathan in USA Today. While gas price spikes are expected nationwide, Fred Rozell, retail pricing director at industry consulting group OPIS Energy, told Rozell that drivers around Milwaukee, Chicago and California cities are likely to experience the sharpest swings because of demand for reformulated gas. ''Get rid of your SUVs while you can,'' Rozell said. Gas stations in most of the Northeast and areas around Milwaukee, Chicago, St. Louis, Houston, Dallas, Los Angeles, San Diego and Sacramento -- metro areas that consume a third of the nation's gasoline -- must sell a summer blend of reformulated gasoline beginning June 1 to meet clean air regulations. If there are no problems with refineries or pipelines that supply the areas, California and the Midwest should have sufficient supplies, according to Nathan. But there's little room for error, and price increases in those areas could push up prices elsewhere. Gas prices in Chicago and Milwaukee peaked above $2 a gallon last summer after retailers began selling reformulated gas, pipeline problems cut supplies to the area and crude oil prices rose. Most of the areas that sell reformulated fuel use gas blended with methyl tertiary butyl ether (MBTE). But gas stations in Milwaukee and Chicago will sell gas blended with ethanol, a corn-based alcohol. California will begin phasing out MBTE and replacing it with other additives such as ethanol, but California uses a different formula than the Midwestern cities. Any refinery or pipeline problems could cause prices in California to spike this summer. But a greater risk is that rolling electricity blackouts could shut down refineries for several days at a time, according to Gordon Schremp, senior fuel specialist for the California Energy Commission. It would take refiners in Texas or the Virgin Islands that can make gas to California's specifications more than three weeks to produce and ship fuel there; in the meantime, gas prices could surge, Schremp said. Refiners nationwide, which are operating at 95 percent of capacity, may not be able to produce enough gas, especially reformulated gas, to meet demand, according to Nathan. Nationwide, the Energy Department expects regular gas prices will average $1.48 a gallon between April and September. That's slightly lower than last summer's average of $1.53 -- a 15-year high when adjusted for inflation. But with low supplies, many analysts including Energy Department economist Dave Costello say prices could spike substantially higher than that, according to Nathan.
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