BIKE: $3 gasoline this summer?

[rcbaker]

>From Chicago Sun-Times

http://www.suntimes.com/output/news/cst-nws-gas16.htm

Summertime shocker: Gas could hit $3 a gallon 

January 16, 2004

BY LUCIO GUERRERO Staff Reporter 


Drivers of SUVs and other gas guzzlers may want to keep their vehicles 
parked over the summer.

That's because some experts are saying that gas could -- gulp -- hit the 
$3-a-gallon mark.

"It is not only possible, it is probable," said Fred Rozell, director of 
gasoline pricing for Oil Price Information Service, which tracks and 
reports on the oil industry. "In the summer, we consume more gasoline 
than we produce.

"[This year] we won't have that extra supply to help us."

Winter weather, bolstering demand for heating fuels, already has cut 
U.S. crude stocks to the lowest level since 1975.

And with simple economics -- in particular the supply and demand rule -
- consumers can expect the price of gas to reach record levels. Those 
prices would especially be possible in Chicago, where government 
regulations require gas stations to supply more costly reformulated 
gasoline to reduce smog.

"This could be the year that gasoline prices start to change the way 
people behave," Rozell said. "They may drive less or look to buy more 
fuel-efficient vehicles and get rid of their SUVs."

That $3 threshold shouldn't come as a big surprise to pump watchers. 
Over the last few days, prices at the pump have done more than just 
trickle upward --they have soared. Prices have surged more than 7 
cents a gallon in the last three weeks. 

Several factors are being blamed for the uptick, including rising crude 
oil prices, a weaker U.S. dollar, colder weather that drove up demand 
for home heating oil, and two U.S. gasoline reformulations, said analyst 
Trilby Lundberg.

Earlier this week, the all-grades average retail price of gasoline was 8 
cents higher than it was at this time last year. The national weighted 
average price of gasoline, including taxes, at self-serve pumps was 
about $1.55 for regular, $1.65 for midgrade, and $1.74 for premium. 

But those numbers are only expected to rise.

According to the U.S. Energy Information Administration, the forecast 
for prices to remain stable through the summer banked on crude oil 
being about $30 a barrel. In the last week, the price of crude oil has 
flirted in the mid-$30s and could rise further.

Retail analysts say gasoline costs rise about 2.5 cents per gallon for 
every $1-a-barrel increase in the price of crude oil. And combine that 
with near record low inventories -- some of the lowest since the long-
line days of 1975 -- and drivers may want to learn that CTA map.

But not everyone is ready to buy into the higher prices.

"There is no way that anyone can predict the price of oil next week, let 
alone next summer," said Geoff Sundstrom, a spokesman for the 
American Automobile Association. "There is no need to start scaring 
the consumer with what prices might be."

Sundstrom said the reasons for the short-term increase have been the 
cold weather and the low inventory, both of which he says will be over 
in the next few months.

Contributing: AP

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