Big Gas Price Hike Likely Come Springtime
An Expensive Seasonal Additive Could Spike Coastal Fuel Prices To Near $4 A Gallon
-
Photo
Dennis Quinn pumps gas into his Isuzu SUV as his dogs look on at a gas station in San Jose, Calif., Jan. 30, 2008. Experts are predicting gas prices will spike again this year, starting as early as February in southern California, jumping to $3.50 a gallon or more by June. (AP Photo/Marcio Jose Sanchez)
-
Interactive
Oil and Gas:
Fossil FuelsLearn more about energy costs and usage in your state and get the latest prices for gasoline.
Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels.
The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.
That would be 17 percent higher than today's average of just under $3 a gallon, which already is about 80 cents a gallon higher than year-ago levels thanks to the surge of crude oil that took futures prices briefly to $100 a barrel. Prices in urban areas on each coast could approach $4 a gallon.
And the reason for the spring price shocks? Analysts say it's linked to a shortage of alkylate, a little-known and expensive gasoline additive that some in the industry are calling "liquid gold." It has become a must-have ingredient since refiners stopped using MTBE two years ago when the potentially cancer-causing additive was found to be seeping into ground water.
The alkylate shortage has become the most important driver of summer gas prices, said Doug Leggate, an analyst at Citigroup Global Markets. "Supply of (alkylate) will set the price of summer gasoline - not inventory levels," he said.
Oil companies deny they are purposely limiting production of alkylate, which like gasoline, jet fuel and asphalt is a byproduct of the oil refining process. But only recently have some started studying how they can boost output, and alkylate prices today are more than 15 percent higher than spot gasoline prices. That means overall costs will jump when it is added in larger quantities to summer-blend fuel.
Without additives, gasoline doesn't burn completely, increasing tailpipe air pollution. And untreated gas evaporates more quickly in hot weather, potentially causing vapor lock when it changes from a liquid to a gas and blocks fuel lines.
The federal government long ago required refiners to boost the oxygen content of summer-blend gasoline to make it burn more completely, a problem that was solved by adding MTBE and, more recently, ethanol.
But ethanol also has a high evaporation rate, so refiners increasingly have turned to alkylate, which Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., calls the "magic bullet" in making summer gasoline.
Alkylate and other gasoline additives don't raise the same safety issues as MTBE because they don't bond with water as effectively as MTBE did, analysts say.
Demand for alkylate changes with the seasons, falling in autumn and rising in the spring. On average, alkylate makes up about 10 percent of a gallon of gas, though that rises to as much as 15 percent in summer. But making more of it is not as simple as throwing a switch since the underlying chemical properties of oil limit how much of any one refined petroleum product can be produced.
On average, about 44 percent of each barrel of oil ends up as gasoline.
The refining process is loud, hot and smelly. Boilers separate, or "crack," oil into new substances by subjecting it to high temperatures and pressure. As different products are boiled out, pipes carry them to other boilers or vessels where they're further refined, mixed with other substances or cleaned of pollutants and toxins.
Alkylate is made via a chemical reaction sparked when olefin fluids and isobutane - two of the smaller byproducts of the main gasoline producing unit - are mixed with acid.
"As opposed to the (gasoline unit) that cracks big components into small, this one takes two components and basically combines them," said Mark Fligner, director of planning and economics at Valero Energy Corp.'s refinery in Paulsboro, N.J., across the Delaware river and just south of Philadelphia.
Owners of about two-thirds of U.S. refineries have invested the $100 million or more it takes to add an alkylate unit. The rest have to buy alkylate on the spot market if they want to use it as additive in their gasoline supplies.
Refiners aren't gaming the system, purposely limiting alkylate production to boost gas prices, said John Auers, senior vice president at Turner Mason & Co., a Dallas consultancy. "They're not because they can't," he said. "You can't make more alkylate than you have feedstocks."
But there are tradeoffs that every refiner must weigh. For example, olefins and isobutane are in high demand for use in producing other lucrative products like plastics. Refiners can tweak their main gasoline producing unit to make more olefins and isobutane, but that would cut the gasoline output.
Alkylate prices have jumped from 77 cents a gallon in the summer of 2001 - when MTBE was still in use - to nearly $3 a gallon at points over the past two summers. Wednesday's price on the spot market was $2.72 a gallon, 40 cents more than the spot price of gasoline, according to Platts. Retail prices for gas are higher because things like state and federal taxes are added. In recent summers, that spot market differential has jumped as high as 60 cents.
Refiners place the blame for spring gas price increases on crude costs, environmental regulations that have increased the overall cost of refining, and their inability to expand or build new refineries fast enough to keep up with gasoline demand.
John Pickering, vice president and general manager at the Paulsboro refinery, said Valero makes enough alkylate to meet its needs, but concedes that there is a national shortage of the additive in the spring and summer.
Other refiners contacted by The Associated Press said they are reluctant for competitive reasons to talk about how they blend gasoline, or whether they face alkylate shortages.
What is known, however, is that refiners are hiring companies such as UOP LLC of Des Plaines, Ill., to determine whether they can increase the capacity of their existing alkylation units. "In the last year or so, there has been a significant uptick (in business)," said Ashis Banerji, director for refining at UOP, which licenses alkylation technology to refiners.
And the 36 percent of domestic refineries that don't have alkylation units are looking at adding them.
"Our impression is that refineries are moving as fast as they possibly can to add alkylation capacity," said Jim Pawloski, business director at UOP competitor DuPont Clean Technologies, a unit of DuPont Co. He said his unit's business has jumped five-fold over the past five years and will likely double again this year.
The steep jump in summer alkylate prices has also caught the attention of at least two companies that used to produce MTBE. Enterprise Products Partners LP and Texas Petrochemicals Inc., both of Houston, say they're closely studying whether to convert idled MTBE plants into alkylate factories.
That also highlights the conundrum that is alkylate: If too many refiners decide to spend big bucks to crank up production, the premium prices now enjoyed by alkylate makers could disappear.
Refiners have to weigh the cost of such an investment against the incremental cost of simply buying the extra alkylate they need. "I'm not sure that it would be economical," said Jeff Hazle, technical director at the National Petrochemical and Refiners Association.
But if production doesn't rise, American motorists will be faced with big jumps in spring gas prices for years to come.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.



And it comes from oil, what a COINIDENCE it happens to be in short supply- raising the costs of fuel.
"a problem that was solved by adding MTBE and, more recently, ethanol. "
MTBE; cancer causing toxic krap, done away with
Bring in; ~Ethanol~,
you lose 10% of your MPG so you have to burn 10% MORE to drive the same distance before they added this overpriced filler. Your corn, grain and land prices have jumped up big as a result of the new demand on these for ethanol production.
Bring in; ~Alkylate~ another toxic cancer causing chemical that given a few years we''ll read about ITS ban like MTBE.
The planet doesnt revolve around whether you can afford something or not- DRIVE LESS! think twice about having more kids!
"Good grief, the country is in recession now. When is someone going to see where the real problem has been?"
The real problem? gas prices? no, the REAL problem is the population in this country has gone from 150 million in 1950 to over 300 million in 2005- THATS the problem!
The same limited finite supply eaten up by TWICE as many people, till there are none ADOPT one, till then spay-neuter your children.
It would make the humping far less painful.
The bad part is Vaseline comes from Oil. They will charge us for it before we bend over.
Posted by sophielhu
The comments section of CBS news is NOT a good place to try to advertize some stupidass website.
Once we can ween ourselves of this *** poison, we can kiss the middle east and all their problems goodbye.
Now the oil companies have made the price more uniform, as they lose potential profit by not having the largest consumer group paying less than everyone else in the world.
Too bad the federal and local governments still don''t believe in improving and expanding mass transit systems, and when they do get around to it, they give the contracts to corrupt friends in private businesses, so the system suffers from slipshod construction, and poor maintenance, and is of no real use to society.
Sorry crystal, but I have to agree on sparks on this one, but for exactly the reasons you posted, the neocons shouted "end welfare" until everyone believed their racist lies that only "minorities" took it, despite publicly available data to the contrary.
So they gutted public assistance, replacing it with sorry programs to train the unemployed for jobs that don''t exist, or the "workfare" programs, which are nothing more than slavery.
Put gas in their car? How about the millions who can''t afford a car to put gas into? They are not "lazy minorities", as the sociopaths label them, they live in areas where the economy has already collapsed, and they have no means to simply move to a better area, which wouldn''t welcome them anyway.
But the Reaganite trickle downers, and the Newt Gingrich "contract on Americans" crowd had everyone cheering as they put this sociopathic agenda into place, so Sparks is in a sense right, we do deserve this, because we let it happen.
Here''s a different angle ont that: Gas prices have not been artificially low. Instead, in other countries they have been high because of taxes (from which they benefit). That being said, those countries have a much better system of public transportation than the US does. In Germany, I never needed a car to get around. And when I did need a car, I only rented it for a couple of weeks. Public transportation there is great. However, in the US, because of zoning laws, businesses and work are located far from housing developments and require extensive traveling. For example, one day I was staying at a hotel in San Francisco, but I just happened to ask worker if he lived nearby. Nope, he lived two hours away. He couldn''t afford to live where he works.
Yours is quite an acceptable view, but don''t forget that the taxes collected from gas in the US are "trickled down" and also "corrupted down" on the heads of the rich anyway, so one can still count that as profit.
However, I was referring only to the out of pocket costs for the average consumers. Sure Europe on the whole has a much more efficient transit system, as does Japan, and even tiny Singapore, but the "privatization of everything" advocates in the US would never allow that to happen in America, and the social fascists would never accept living in the same general area as the "working class".
Whatever the reason, any further sharp rise in gas prices could very well trigger social instability, as millions will no longer be able to afford to travel to work, as there won''t be enough left over to eat and maintain shelter.
The resulting displacement of the remainder of the middle class could trigger riots and general anarchy, and it is against this backdrop that Mr. "bomb Iran" McCain runs for president.
Any real threat perceived by Iran could compel them to sell to Russia, Japan and China exclusively, they will still get good prices for their oil while the US economy collapses.
Yet they continue to make not only profits, but RECORD profits and always claim they are not doing somthing to cause high prices and each time Congress looks into the matter and not once has Congress ever really found anything. Maybe the rest of us are really just stupid.
It''s strange how this country can spend trillions of dolars protecting our interest in the middle east (oil). We can sacrifice thousands of our sons and daughters. No problem. But spend $5.00 a gallon at the pump,that''s the last straw.
Sadly it looks like this is what it will take to smarten people of this country up...$200.00 to fill my SUV,OMG we need to do something!!
We have had the ability to produce our own energy for decades,why congress allows this to go on is insane.
You do want to save the planet?? right??. We''ll get Big Oil a major contributer to the Global Warming Agenda free room to help us overcome this sad scenario. Record profits you ain''t seen nothing yet. If we hit you consumers high & hard enough at the pumps, etc. we''ll get you to tone down your foot print.
We''ve got other tactics that we''ve been setting in place a little at a time to slowly choke you infidels out.
O give me a home where the buffalo roam and the deer & and the antelope play.
Love it! CACKLE CACKLE CACKLE
And just where are these record profits going? Research? Retrofitting pumps for alternative fuels? More refineries? I doubt it.
IMPEACH BUSH & CHENEY NOW!
Bush - the new Hoover...
TRANSLATION: REFINERS ARE FIXING THE PRICES!!!
As usual, the oil companies have advanced the usual excuses as to why oil prices are going up from "meltdowns" at refineries to moose pooping on the Alaska pipeline to the all-time favorite line of "the terrrrrrrorists are out there", but as we all know the real reason is a much "sweeter" bottom line. The fear that a Whimpo-crat may capture the White House and the Whimpo-crats take solid control of Congress, has the oil companies pushing their agenda of "I Cheat ''em And How" to the max.
It is expected that other areas of corporate America (now known as GREED America), will follow suit.
SIG HEIL, BUSH!!!!!
He needs to talk to his oil buddies closer to home. If he truly cared for the "''merican pea-pull."
When they sold us that bill of goods, we screwed ourselves right out of holding them to a fair profit margin.
And most are still yelling for less government!!!
You have to live with what you buy!!! And you bought it!!
When you supported de-regulation and less government, you took the people out of government, and gave our economy to profiteers!!!!!
We need to step in again and regulate those industries that have huge effects on our economy...aka the oil industry, and health insurance companies, etc and quit allowing them to happily line their pockets while the middle class struggles to buy their products and pay their share of taxes.
Especially the oil industry because it effects the delivery of all our goods, and especially our food and cost of getting to work. Health care profiteers should not be allowed to limit our access to health care, nor profit so highly off of people''s suffering.
Well said!
I am all for the use of electric cars within the city limits. In fact, when I run around my neighborhood, I do it on a golf cart, lol
People living in the city do not need cars that go 120 mph on freeways especially after a night at the local beer hall.
If they do not agree then the Govt'' needs to start importing, drilling and refining themselves. Anytime the companies (Exxon, BP, Shell ect) say there is a shortage, the govt'' should step up and say no problem we''ll flood the market with the gas we have to keep prices below $2.00 per gallon.
More pressure to develop alternate fuels, which was obvious back in 1978, might materialize. The oil dominated leadership of this country will maybe be forced to make the honest changes. If this isn''t the right time, perhaps later. The oil industry runs the country and they will fight until the end to maintain their power, shifting only after they have secured the identical position utilizing alternate fuels.
The "We the People" have nothing to say and that''s a fact. Just figure out ways to survive. I drive less than I used to and I walk more.
But what can we do as individuals to make this happen? Or is there even anything we can do, do we just have to wait it out if there is an end to it. A simple vote someone into office or the deaths of poor? What can I do other than get mad and post blogs and hope the right person reads it?
Electric cars are a great idea. We''d get one. But I know a lot of people who would still be stuck in the same situation because they can''t afford a new car now, let alone a whole new breed. So the lower income people will still be in the same boat. What about them?
PEOPLE CANNOT AFFORD THE FUEL! PURE AND SIMPLE!
TALK ABOUT GRINDING TO A FAST STOP!
Did you read just the article? Have you read any of the posts made?
Not that that alternative fuel is a bad idea, it is a good idea. Do you you have any idea what it takes? I know a guy that breeds corn for a living. Yes, I said breeds corn for a living. He said it takes 5 years to turn corn into fuel! 5 years! This is a process that they have been working on for a long time, but if you want organic fuel, it is going to take A LOT of work.
And seriously are you going to car pool with someone who has to drop 2 or 3 screaming brats off at daycare on the way to work?