CNN: Gas Will Hit $4 This Summer

It’s late April… the ‘summer driving season’ is still a month away and gasoline inventories in the United States are low.  Really low.   Because of this, CNN is reporting that at least parts of the US are going to see four dollar gasoline at some point this summer, and this is just from normal supply/demand issues.  Geopolitical issues and/or a hurricane or two getting into the Gulf of Mexico could mean that four bucks a gallon is only a waypoint on gasoline’s road to five dollars per gallon or higher.  So much for the earlier happy talk that gas prices would average less than three dollars this summer.

According to CNN’s story, US refineries are operating at around 88% of capacity (without explaining why), and gasoline stocks are still dwindling.   Considering both the threat to the economy high gas prices poses, as well as the money-making opportunity these prices represent, I’m surprised that the refineries aren’t going full-bore.  Perhaps it has something to do with PEMEX  being unable to deliver the expected amount of crude to the USA?  You can’t refine what you don’t have enough of…

Another interesting tidbit comes from Robert Rapier’s blog, where an EIA official comments thusly:

Inventories are very low, no one can doubt that. On a Days Supply basis, the situation is even worse. That said, there are 5 weeks until the Memorial Day weekend (the unofficial start of the peak driving season). The bottom end of the average range at the end of May is 208.6 MMB, or about 14 MMB above where we are right now. So, we would need to see an average build of 2.5-3.0 MB each week over the next 5 weeks just to get back to the bottom end of the average range. Is this possible? Yes. Is it likely? I better leave that answer to others. But we need to see imports stay high (emphasis mine) and start seeing more gasoline production (from higher crude refinery inputs), which means we can’t afford to continue seeing more refinery outages, if we have any chance of reaching that target at all.

By the way, I would have expected to see inventories increase as well.

Good luck to us on all that.  I’m heading out on a short road trip this weekend and am glad to be doing so when gasoline prices are still relatively cheap.

I’ve also noticed a lot more new large trucks and SUV’s in the parking lot at work and wonder how all of these people will react when their weekly commuting costs double later this summer… it’s distinctly possible that this will happen.

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5 Responses to CNN: Gas Will Hit $4 This Summer

  1. skTheTwo says:

    I’ve been monitoring the spot price of unleaded gasoline for a while now – ever since the hike in retail prices upset me enough to look at modeling it. The end result was a 3 day “gas cast” that I publish daily on my homepage. It tells you WHEN it is cheapest to buy gas at the retail level ( in the next 3 days ). Of course for your locality there are sites that like gas buddies that tell you which gas station to go to for cheap gas.

    Will it reach $4 a gas ? I’ve tried creating longer term model of retail gas prices when I backtested them, they weren’t much better than random guesses. The 3 day model though is rock solid.

    -K

  2. Jim says:

    On this morning’s ride I noticed that the SA station nearest my house was selling regular for $2.96. I thought that seemed a bit higher than what I’d been seeing recently. Later, I saw that another nearby SA was in the $2.60s. I wondered if maybe there was a panic signal of some sort that triggered the one station to jack up the price. In any case, I think we’ll see a fragile state where prices fluctuate wildly in time and space in the very near future.

  3. Bart says:

    How typical that I shoot my mouth off about how reasonable gas prices currently are, and the petrogods punish me. As I left for work this morning gas was around $2.60 and on the way back it was $2.92.

    It seems like every time some Arab leader catches a cold the price of gas jumps and then settles back down. The trend I think we’re seeing is something like a thirty cent jump (as an example) followed by a gradual drop in price by 20-25 cents followed by another 30 cent jump. Prices are all over the place, but the overal trend seems to be rising back to where we were last summer before the price of gas miraculously (sarcasm) crashed right before the elections.

    The Saudis keep saying they have plenty of spare capacity to bring online if needed. I think we’ll get the chance to see if they’re full of crap or not before the end of summer.

  4. Rebecca says:

    The franchise stations (Chevron, Conoco, etc) have a regional distributor that sets the price for gas in each town/city/region. When they decide it needs to change they call (at least they used to, now it may be a computer message) all those stations and tell them to change the price.

    There are a lot of supposed reasons for the refineries running below capacity: maintenacne, unexpected breakdowns, fires, etc. But I think the main reason is that they simply can’t get enough of the light sweet crude they’re built to handle. Interestingly, I think most of the imported gas is made out of heavy sour crude.

  5. Frank says:

    This is all very upsetting to see the price of gas go up six times in the last seven days.

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