NEW YORK – Get ready for another surge in gasoline prices.
Experts predict 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 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.
The reason for the spring price shocks? Analysts say it’s linked to a shortage of alkylate, an additive that some in the industry are calling “liquid gold.” Refiners stopped using MTBE two years ago when the potentially cancer-causing additive was found to be seeping into groundwater.
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.
Without additives, gasoline doesn’t burn completely, increasing tailpipe air pollution. And untreated gas evaporates more quickly in hot weather, potentially causing vapor lock.