Gas prices likely to rise this summer
Written on March 19, 2009
A severe economic downturn has spoiled our appetite for gasoline, with millions of Americans no longer commuting to work or planning summer trips.
According to the AAA website, the average price for regular-grade gasoline has dropped to $1.91 a gallon from $3.28 a year ago. In St. Louis, the average price is $1.78, compared with $3.08 a year ago. In the Metro East area, where taxes are higher, the average is $1.95, down from $3.32.
Yet prices are expected to still rise in coming weeks. Here are some things you might expect to see this summer at the gas pump.
When are gas prices going to go up again?
Prices should pop up by 10 to 15 cents per gallon by summertime. Prices rise almost every year before the summer driving season, as refineries slow production.
Why are refineries slowing production?
State and federal regulators require refineries to make gasoline that limits pollution and smog over the summer, when ozone levels are highest. Refineries take plants off-line as they prepare for these summer grades, and the drop in production can lead to a temporary supply shortage. Summer-grade gasoline is also more expensive to produce.
Will prices go back down?
Normally, prices ease once all the refineries get back on line. But this year, many refiners are churning out even less gasoline to match falling consumer demand.
Charles T. Drevna, president of the National Petrochemical and Refiners Association, said refiners are like any other manufacturer. When people consume less, producers need to cut back to keep from flooding the market and erasing profit margins low cost payday loans.
"The demand for finished products, whether it’s gasoline or cars, or washing machines or flat-screen TVs, has plummeted," Drevna said.
Bill Day, a spokesman for refiner Valero Energy Corp., said gasoline demand was down about 6 percent to 7 percent from last year. In response, Valero’s refineries are running at about 70 percent to 75 percent of capacity.
"There’s plenty of inventory out there," Day said.
Will gasoline rise to $4 a gallon again?
Probably not anytime soon. The market has a huge surplus of cheap oil, and that should continue to weigh down gas prices somewhat, compared with last year.
The Energy Information Administration said last week that crude supplies swelled to 351.3 million barrels, enough to fuel 15 million cars for a year. It’s also nearly 16 percent higher than year-ago levels.
Even if demand jumps suddenly, gas prices could fall back below $2 a gallon later this summer, prices not seen in some time during the driving season, said Phil Flynn, an analyst at Alaron Trading Corp.
"If we have hurricanes this summer, that could change things," he said. "But I think we’re definitely going to see the lowest prices we’ve seen in five years."
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