Sanity in the World?

Into all lives, a little Sanity must fall.

My Photo
Location: Michigan, United States

See post here: About Me

Thursday, April 06, 2006

Gasoline prices predicted to surge again

Predictions of Gasoline prices to surge during the summer months seem to be coming true, with gasoline prices jumping 30 cents a gallon within the last couple of months due to the Iran confrontations and possible strikes against them. Now prices are predicted to soar even more as new changes to diesel and regular fuel are added to the refinery costs:

Spring is barely here, but gasoline prices already have begun climbing toward - perhaps to beyond - $3 a gallon for the summer driving season.

There is more at play than the usual anticipation of increased demand from vacationers. Oil refiners are working through major changes to the composition of gasoline and diesel fuel.

With crude-oil prices already $9 a barrel higher than a year ago, analysts expect the formulation changes will contribute to a fourth consecutive summer of record fuel prices.

In the last month, average gasoline prices in Philadelphia and the Pennsylvania suburbs have climbed by 30 cents a gallon, or 13 percent, to $2.60 a gallon, AAA Mid-Atlantic reported yesterday. In South Jersey, the three-day average was $2.42, a gain of 36 cents, or 17 percent.

The federal government reported yesterday that gasoline inventories had declined for the fifth straight week, maintaining upward pressure on prices.

It is going to be "another summer of very volatile prices, with $3 within reach," predicted Ben Brockwell, editor in chief of Oil Price Information Services.

The Energy Information Administration said that both formulation changes had the potential to cause "regional supply disruptions with periods of increased volatility."

The first hurdle is the phaseout of MTBE - methyl tertiary butyl ether - which has been added to gasoline in Philadelphia and certain other areas of the United States to reduce air pollution.

MTBE causes gasoline to burn more cleanly, reducing toxic emissions from cars. But it has come under fire for contaminating groundwater. Because the federal Energy Policy Act of 2005 failed to shield oil refiners from water-contamination lawsuits, and an increasing number of states are banning the substance, refiners decided to stop using it.

However, refiners must still meet clean-air regulations, and can do that only by replacing MTBE with another clean-burning component. Federally subsidized ethanol - which is also being touted as a renewable fuel that can help reduce dependence on oil - is the only viable choice, industry experts said.

Ethanol has been used as a clean-burning additive for years in some parts of the country, especially in Midwestern markets, but the massive shift to ethanol this spring in the Northeast and in Texas could strain the supply chain, even if there is enough ethanol to meet demand. Plus, ethanol costs more than MTBE, putting further pressure on prices.

Valero Energy Corp., the largest U.S. refiner, estimated that removing MTBE from gasoline will reduce U.S. supplies by about 145,000 barrels a day - or about 1.5 percent of total U.S. supplies.

"That is like losing the gasoline production of three 100,000-barrel-per-day refineries - just as we head into summer driving season," said Mary Rose Brown, spokeswoman for the San Antonio, Texas, company.


Scandola said the second big change this year, switching to diesel with a much lower sulfur content, was a greater challenge for the fuel-transportation industry.

The regulation on ultra-low-sulfur diesel - 15 parts per million compared with 500 in the current formulation - is unusual in that the sulfur specification has to be met at the fuel nozzle, not at the refinery gate, as is typically the case.

The reason for this is that new diesel truck engines - starting in model year 2007 - must use ultra-low-sulfur diesel in order for new pollution-control equipment to work.

It is a challenge for pipeline companies because a single pipeline carries gasoline, diesel, home-heating oil, and jet fuel, one after another. That creates the potential for sulfur from fuels such as home-heating oil to contaminate the ultra-low-sulfur fuel as it makes its way through the pipeline.

To prevent such contamination, pipeline and terminal operators are spending hundreds of millions of dollars on monitors and on other equipment to segregate ultra-low-sulfur diesel from heating oil and other products, Scandola said.

The regulation goes into effect for refineries on June 1, and must be met at retail by Oct. 15, with some allowances for higher-sulfur diesel for the next four years.

All these complications add up to a market that has plenty of reasons for commodity traders to jump at the least sign of trouble, driving prices higher, said Brian L. Milne, an editor with DTN, a business information company. He said: "They climb the wall of worry."


Get ready to dig deep into your wallet/purse during the summer driving, not only will this effect vacationers/tourism but also product delivery by trucks.

Remember last year when gas prices surged, truckers talked about parking thier rigs in protest, which would increase product prices of goods all over America.

SEATTLE - Trucks drivers are telling KOMO 4 News they are hearing increasing discussion about parking rigs to protest high diesel prices.

Several drivers say the talk is "all over the CB" across the country.

This week, log truck drivers in southwestern Washington parked their rigs to try to force additional fuel allowance from timber companies. In the Miami area, truck drivers formed a 20-mile long protest caravan.


Mike said: "I don't know (if) we can bring the price of fuel down by doing that; but, hopefully, it would get the government's attention. Something has to be done about it."

The wife of another long-haul driver, Judy Looney said: "That'd get a message to just about everyone -- when your grocery store start running out of food."

And driver Owen Adams said: "You would be hungry if you didn't get your food, if you didn't eat; and that's what I do, I haul produce."

Adams isn't ready to park just yet, although he got a shock when he checked the pump. His total bill after buying fuel for the truck and the refrigerator was $352.


A new surge in gas prices, especially for Diesel will again cause truckers to begin talking about parking their rigs once more.

It is sure to be a 'hot' summer, and I don't mean the summer heat......