CAMARILLO, Calif. -- The U.S. average self-serve regular price leaped another 19.47 cents in the past two weeks, to a new record high price of $3.0684, according to the most recent Lundberg Survey of approximately 7,000 U.S. gas stations. This beats the August 11, 2006, record by 4.28 cents. It is six cents shy of the true all-time record price in March 1981 when the price of regular was $1.35 but $3.13 in today's dollars.
Lundberg rack and dealer buying price data and research predicted falling [image-nocss] retail before now, but in the past two weeks, one dozen more refining capacity reductions took place in the United States and around the world, further tightening the gasoline market. Some of the non-U.S. events were in merchant areas, inhibiting gasoline export volumes, but now with U.S. record-high prices, much bigger volumes of gasoline from offshore are expected.
Some 88 cents ago (in the U.S. average price since late January), there were normal pre-Spring refinery turnarounds in the works as well as catch-up repairs from the 2005 hurricane damage. These were followed by extensions of work projects, fires, explosions, utility company power losses (two of which were raccoon- and opossum-induced), lightening hitting a refinery and even a reported bombing of a refinery in Sri Lanka that can't have added to traders' confidence in world gasoline supply. In two gasoline exporting refining centers, Saudi Arabia and Singapore, there was downed capacity. The additional dozen events in the past two weeks alone arrested a price decline of two weeks ago and prevented its arrival on the street.
Price peaking and falling now seems assured. Assuming lower racks and steady crude prices, refinery margins are set to shrink while retail margins appear ready to expand in recovery from recent loss. Although the price storm is probably coming to an end, suppliers and retailers can now expect pellets of official heckling and threats to end price gauging that has not taken place.
As news media, politicians and others intimate sinister refiner culpability for months of gasoline supply tightness and propose solutions that would make it worse, the greatest solution is building mass offshore in the form of many new refineries under construction. The new U.S. record-high price will add further encouragement to such international construction.
Meanwhile, gasoline prices rose yet again at the pump Monday, but fell along with oil in the futures market as traders bet that the government will report an increase in gasoline inventories this week, reported the Associated Press.
The national average price of a gallon of gasoline reached $3.035 Monday, up 0.1 cent overnight and more than 2 cents since Friday, according to AAA and the Oil Price Information Service. In some parts of the country, however, gasoline was approaching $4 a gallon.
Gas prices have risen sharply in recent weeks on concerns that refineries aren't making enough to meet peak summer demand. The summer driving season begins on Memorial Day weekend.
But retail prices lag oil and gasoline futures prices. And while both futures contracts have also risen in recent weeks, they were trading lower Monday. Gasoline futures for June delivery fell 2.68 cents a gallon to settle at $2.1896 on the New York Mercantile Exchange (NYMEX). Light, sweet crude for June delivery fell 46 cents a barrel to settle at $61.47 on NYMEX.
There hasn't been any fundamental change in the oil and gasoline futures markets, said Jim Ritterbusch, president of Ritterbusch & Associates, Galena, Ill. "We're still seeing too much crude oil sloshing around in Cushing, [Okla.]," the oil terminal that supplies many domestic oil refineries, he told AP.
Unexpected refinery problems are a big part of the reason for the spike in gasoline prices of recent weeks. There have been at least a dozen additional partial shutdowns in the U.S. and internationally that cut refining capacity.
For instance, one of the nation's largest refineries, a BP PLC plant in Indiana that processes more than 400,000 barrels of oil per day, will not be operating at full capacity for several months due to unexpected repairs. Other examples include a 170,000-barrel-per-day plant in McKee, Texas, that was shut down for a month, and a 470,000 barrel-per-day plant in Texas City operating at less than half of capacity.
The refinery problems have led to an oversupply of oil, and an undersupply of gasoline. That's pushing oil prices lower, Ritterbusch said. And while gasoline futures prices were down Monday, that could change quickly in a market that remains volatile, he said. "It's lower, but just last week it was teasing new highs," he said. "You're bound to see some profit-taking."
Jason Schenker, an economist at Wachovia Corp., said he thinks traders are anticipating an increase in gasoline stockpiles in the U.S. government's weekly inventory report, to be released on Wednesday. "That gasoline inventory expectation...could be what's driving the market down," he told AP.
Analysts last week suggested the market may have sensed a peak in prices for gasoline. But Ritterbusch disagreed, arguing that there will have to be evidence of a substantial build in gasoline inventories before prices drop significantly.
"It's premature to say we've seen the highs," he said. "We're one significant refinery problem away from seeing fresh highs."
And some experts say $4-a-gallon gasoline is just around the corner. "I think it's going to happen," Phil Flynn, a senior market analyst at Alaron Trading, Chicago, told CNNMoney.com. "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 AAA. And one service station in San Francisco was charging $3.95, said to the report, citing GasBuddy.com.
Meanwhile, the high gasoline prices have triggered the latest round of gasoline boycott emails. One message calls for consumers to boycott U.S. gas stations on Tuesday, May 15:
NO GAS on May 15th 2007
Don't pump gas on May 15th.
In April 1997, there was a "gas out" conducted nationwide in protest of gas prices. Gasoline prices dropped 30 cents a gallon overnight.
On May 15th 2007, all internet users are to not go to a gas station in protest of high gas prices. Gas is now over $3.00 a gallon in most places.
There are 73,000,000+ American members currently on the internet network, and the average car takes about 30 to 50 dollars to fill up.
If all users did not go to the pump on the 15th, it would take $2,292,000,000.00 (that's almost 3 BILLION) out of the oil company's pockets for just one day, so please do not go to the gas station on May 15th and lets try to put a dent in the Middle Eastern oil industry for at least one day.
If you agree (which I cant see why you wouldn't) resend this to all your contact list. With it saying, Don't pump gas on May 15th."
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