$3.50-a-gallon gasoline predicted

1/31/2008

NEW YORK - Experts are predicting that gasoline pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter-blended to summer-blended fuels.

The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.

That would be 17 percent higher than today's average of just under $3 a gallon, which is about 80 cents a gallon higher than year-ago levels. Prices in urban areas on each coast could approach $4 a gallon.

Analysts say the spring price jumps are linked to a shortage of the additive alkylate. It has become a must-have ingredient since refiners stopped using MTBE two years ago when the potentially cancer-causing additive was found to be seeping into ground water.

Oil companies deny they are purposely limiting production of alkylate, which, like gasoline, jet fuel, and asphalt, is a byproduct of the oil-refining process. Alkylate prices today are more than 15 percent higher than spot gasoline prices. That means overall costs will jump when it is added in larger quantities to summer-blended fuel.

Without additives, gasoline doesn't burn completely, increasing tailpipe emissions. Refiners place the blame for spring gas price increases on crude-oil costs, environmental regulations that have increased the overall cost of refining, and their inability to expand or build refineries rapidly enough to keep up with gasoline demand.