CAMARILLO, Calif. -- The U.S. average self-serve regular price jumped 14.95 cents per gallon in the past two weeks, to $2.4949. There will be more, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. This dramatic jump is part of a surge started in December, already 37 cents per gallon so far.
Although some of the rise comes from higher crude oil prices late last week, the biggest drivers come from a number of Environmental Protection Agency (EPA) and energy [image-nocss] bill changes to specs. Of these higher-cost specs, some are already in effect and some are reflected in advance because refiners idling some capacity now for work products in advance of summer demand and investing extra time and resources due to this year's recipe changes.
Case in pointethanol, sales of which are now mandated for gasoline blending, makes compliance with already existing seasonal vapor pressure reductions costlier to achieve, while adding additional per gallon costs downstream of processing. Lower sulfur adds cost, as does loss of methyl tertiary butyl ether (MTBE) in the pool to be replaced by tax-subsidized but higher-priced and lower-energy-content ethanol. Indirectly, this summer's deadline for refiners to supply a new ultra-low-sulfur on-road diesel product will affect all products.
This convergence of several costly changes at once is unprecedented in U.S. motor fuels history.
Even if crude oil prices do not advance further, gasoline prices most likely will. There is not much room, either in refiner or retailer margins, for absorbing new cost without full and fast passthrough to the pump. Fortunately, the U.S. economy currently appears able to absorb current pump prices without a loss to gasoline demand.
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