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Rite Of Spring: Higher Gas Prices

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AP
While an ample supply of gasoline has kept prices low all winter, filling up the tank could soon become more expensive.

The anticipated springtime increase should be less extreme at its peak than in recent years however, because a gallon of gas costs 25 percent less today than it did a year ago.

Analysts say prices could begin to rise as early as mid-March, when refiners shift production from winter- to summer-grade fuel in preparation for the country's busiest driving season.

Spikes have been routine in recent years in California, the Midwest and parts of the Northeast as buyers bid up prices on the wholesale markets, fearing shortages of a special blend of federally mandated fuel, known as reformulated gasoline, which produces less smog.

Many analysts believe petroleum markets will exhibit a familiar volatility in the weeks and months ahead despite 6 percent more gasoline inventory than last year and weaker consumer demand.

"Once we get to March, throw out all the fundamentals," said Peter Beutel, publisher of Cameron Hanover's daily energy newsletter. Beutel said he expects unleaded gasoline prices to rise as much as 15 cents a gallon between March 15 and Memorial Day.

The average retail price of gasoline has risen between March and May for 18 years running, Beutel said: "Why is this year going to be different?"

Last year the average price of regular unleaded was $1.38 a gallon on March 19 and rose to $1.65 by Memorial Day. The pattern was similar in 2001. Today, a gallon of regular unleaded costs about $1.10.

But some analysts believe it is too soon to predict what will happen next.

Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, said many refiners are preparing to produce summer-grade gasoline earlier than usual to grab market share when the warmer weather arrives. That could put the industry in a better position to meet peak demand this summer, Silliere said.

By Brad Foss ©MMII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed