Operations

Is $4 a Gallon Gasoline Coming Soon?

Posted on May 9, 2007 by LCT Staff - Also by this author - About the author

NEW YORK CITY — With gas prices near record highs, many experts say $4-a-gallon gasoline is just around the corner. "I think it's going to happen," said Phil Flynn, a senior market analyst at Alaron Trading in Chicago. "Unless things change dramatically, I think we're going to see $4 a gallon."

Already, prices in California average $3.48 a gallon, according to the motorist organization AAA. And one service station in San Francisco was charging $3.95, according to GasBuddy.com, a site that lists the cheapest and most expensive gas stations by city and state across the country.

Refinery problems and strong demand are the two main reasons cited for the runup. Prices hit a record high of $3.07 a gallon, according to the Lundberg survey. Refinery output in the U.S. has been below normal for several months now, after fires and other accidents combined with longer than normal maintenance shutdowns, hurting production. This all comes just as the nation gears up for the summer driving season, spurred by vacationing families and students out of school.

Meanwhile, demand has shown no sign of easing. That's despite a nationwide average price of $3.07 a gallon for unleaded regular, a record, according to Trilby Lundberg, publisher of the Lundberg Survey of thousands of stations nationwide.

Wholesale gasoline prices have fallen 20 cents over the last week and prices for gasoline futures on the New York Mercantile Exchange have lost about the same amount over two weeks, according to Tom Kloza, chief oil analyst at the Oil Price Information Service, which gathers statistics for AAA. Kloza said gasoline prices as measured by AAA have not yet hit a record, clocking in at $3.04 a gallon Monday, two cents shy of the 2005 record. When inflation is factored in, Lundberg's record of $3.07 still trails the all-time high in March 1981. At the time, gasoline cost $1.35 a gallon - and in today's dollars, that's $3.13 a gallon, said Lundberg.

Source: CNNMoney.com

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