Summer gas prices could hit $2.50 a gallon

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Updated 08:32 AM ET Summer gas prices could hit $2.50 a gallon

By Sara Nathan, USA TODAY

Consumers near major cities could see spikes in gas prices this summer, but drivers around Milwaukee, Chicago and California cities are likely to experience the sharpest swings because of demand for reformulated gas.

Gas prices could surge as high as $2.50 a gallon in areas that use reformulated gas, says Fred Rozell, retail pricing director at industry consulting group OPIS Energy.

"Get rid of your SUVs while you can," he says.

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 USA'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 ample supplies. But there's little room for error, and price increases in those areas could push up prices elsewhere.

Gas prices in Chicago and Milwaukee spiked above $2 a gallon last summer after retailers began selling reformulated gas, pipeline problems cut supplies to the area and crude oil prices rose.

"The opportunity exists for what happened last summer to happen again, and it may be even worse," says William Fleischli of the Illinois Petroleum Marketers Association.

Fleischli says he is already worried, because a refinery that supplies 9% of the area's gasoline recently announced it will close this summer rather than upgrade its facilities to comply with environmental regulations.

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, says 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 3 weeks to produce and ship fuel there; in the meantime, gas prices could surge, he says.

Refiners nationwide, which are operating at 95% of capacity, may not be able to produce enough gas, especially reformulated gas, to meet demand. "Our daily use of gas is outstripping what we can make, so if we have a heavy driving season, we just draw down supplies," says John Kneiss of the Oxygenated Fuels Association, which represents refiners that use MTBE.

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 Energy Department economist Dave Costello says prices could spike higher. "Supplies are going to be low, and that opens up the possibilities that you could have some real price run-ups."

http://www.usatoday.com/money/general/2001-03-07-gas.htm

-- Martin Thompson (mthom1927@aol.com), March 07, 2001

Answers

Thanks as always Martin for the story. We are going to be swapping a large part of our paychecks from heating our homes to, filling up the gas tank/s this summer. Both of which are inflationary, especially for farming. They have to use fertilizers and big equipment to till the soil and harvest. These prices will get passed on, minimally by the farmer but more so by the time it reaches the grocery store.

Each of the stories presented here at Grassroots are pieces of the larger puzzle. Each one describes a small piece of the story that will play itself out in the coming months and coming years (especially the global warming stories and population pressure stories). If and I say IF we take the time to piece the puzzle pieces together we can be more prepared for what the future entails and that includes personal preparations from purchasing a more fuel conservative vehicle to small energy saving measures at home to registering vote, to making investments in certain technologies because of there promise (or actually bothering to save money), to moving to a different area all the way down the line to making permanent life style changes.

Information provided on the board today (if its evidence of a trend) will have a hand in shaping our lives tomorrow. The California energy crisis is a prime example. The upheaval there is causing major economic repurcussions throughout the country. If you live in California you can do one of two things. Complain about it or make changes but one thing is for sure, Californians will be paying extraordinary amounts of money in extra taxes and/or energy costs for many years to come as will neighboring states because of collateral damage. Anything we as individuals can do to get off the "grid" or minimize our exposure will be to our LONG-TERM benefit.

Grassroots helps us to formulate long-term goals if we choose to connect the dots on the puzzle pieces.

-- Guy Daley (guydaley@altavista.com), March 07, 2001.


Guy, nicely put, especially in light of the concurrent troll thread "What is the purpose of this forum."

Several of your comments could easily be lightly edited to be included in any revision of the introduction to this forum--you have nicely summed things up, in my opinion.

-- Andre Weltman (aweltman@state.pa.us), March 07, 2001.


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