Oh boy! Gas prices back up again for the summer

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Breaking News Gas Prices Primed to Rise Anew This Summer February 1, 2001

Gasoline prices are likely to rise at the pump this summer, in part because of the price of natural gas, which is crucial in the production of MTBE, a high-cost gasoline component that reduces tailpipe emissions, Thursday's Wall Street Journal reported.

Another reason is the recent decision by the Organization of Petroleum Exporting Countries to trim crude-oil production by 1.5 million barrels a day.

Natural gas is used to make methanol, a primary ingredient in MTBE, whose full name is methyl tertiary butyl ether. But with natural gas having soared above $10 a million British thermal units in late December on the futures market, "it doesn't make economic sense to produce" methanol, says George Beranek, an analyst at Petroleum Finance Co., a consulting firm in Washington, D.C. Indeed, analysts say as much as 50% of North American methanol production capacity is idle. Although natural-gas prices have declined to about $6 per million BTUs currently, that's still far above the level of about $2 per million BTUs a year ago.

As a result, "we don't see starting off the driving season any better than last year," says Dave Costello, an economist with the Department of Energy's Energy Information Administration.

The price of MTBE also has risen, but not enough to offset the sharp increases in natural-gas prices. Indeed, MTBE prices jumped by nearly 37% to a high of $1.41 a gallon in January from a low of $1.03 a gallon a month earlier. Still, some refiners have stopped making the chemical temporarily. For example, Valero Energy Corp. in San Antonio dropped its MTBE production from mid-December to about mid-January by more than half, to 7,000 barrels a day. Overall, the industry has cut back by 80,000 barrels a day, or about 35%, Valero says. As a result of the lower MTBE supplies, both reformulated and total gasoline production fell about 4% during the period.

{Personal Note} I believe that the national pastime will no longer be baseball but energy conservation practices. Everybody is getting clobbered by the cost of natural gas, electric and of course, fuel for our transportation which will skyrocket again this summer. The businesses that are able to mitigate their energy costs will survive whereas those that don't will die. Lots of bankruptcies and layoffs around the bend for this problem.

-- Guy Daley (guydaley@altavista.com), February 01, 2001

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