TodayApril 17, 2022

Will we see $4 a gallon gas this summer?

It’s summer time. The price of gasoline is already starting to climb; according to AAA, California is averaging $3.61 a gallon, Hawaii, $3.37 a gallon, New York, $3.26 a gallon and Florida $3.20 a gallon. The price of gasoline is going up again. The question is, how high will it go?
Analysts are saying that they would not be surprised to see crude oil over $70 a barrel again this summer. As we head into the summer, with politically troubled Nigeria looming, prices of oil could become very tense. We still have the hurricane season ahead of us and some of the refineries are still struggling to get up to full capacity from the ’05 hurricane season. What will all this mean to you, the consumer, at the gas pump?
Back in the heyday of refineries there were 324 refineries, the last one built in 1976. Currently, there are 149 refineries operating in the United States. Total capacity at operating refineries is roughly 17.5 million barrels per day, while total United States demand for oil products averages nearly 21 million barrels per day. Of the 17.5 barrels per day, approximately nine million barrels per day are made into refined motor gasoline. Total demand for motor gasoline is averaging 9.4 million barrels per day.
This is the time of year that we typically build inventory. During the summer, we can’t produce enough gasoline to keep up with the demand of gasoline with all traveling that is being done. The oil companies stock pile the motor gasoline in order to make it last and to keep the price on a more even keel. This stockpile amount is very important. If you watch the stockpile number alone you will be able to tell whether or not the price of gasoline will go up. Why? Because oil companies get very nervous when Americans use the stockpile and their refineries aren’t able to produce enough to cover that amount. Are we already dipping into the stockpile, or are we putting gasoline away for the peak summer driving time? Driving the Nation
Driving the Nation We import approximately 1.1 million barrels per day of gasoline and gasoline components. The cost of refined gasoline is higher than crude oil because one must refine the oil to get gasoline. Gasoline costs $15 to $20 more per barrel compared to crude oil. We could reduce the trade deficit by roughly $18,000,000 a day if we refined all our oil into gasoline here in the United States. It wouldn’t save us money at the pump, but it would decrease the trade deficit if we could import crude and refine it into motor gasoline here.
Two big refineries are shut down right now: BP’s Whiting Refinery in Indiana is the 3rd largest refinery in the United States, producing about 420,000 barrels per day (BPD). According to Reuters, output has been cut to 200,000 bpd because of a power outage caused by a fire. Reuter’s source said the ouput cut could continue “for months”
Valero’s catalytic cracking refinery is down because of a mechanical failure of a slide valve to the FCC feed. This St. Charles, LA refinery produces 60,000 bpd a day and will be down, according to a Valero spokesperson, for 10-14 days.
Each oil company that can expand is finding a way to do so with their facilities. Marathon Oil is planning an expansion of their Garyville, LA refinery, from 245,000 bpd to 425,000 bpd, at a cost of $3.2 billion. The rub is going to be that the price of gasoline will probably not go down. The cost of refining is about 24 percent of each gallon of gasoline. The refinery expansion will be passed on to the customer.
Expect gasoline to continue to increase and oil companies profit’s to increase. We are using a record number of barrels per day of motor gasoline, 9,342 in April, 2007, compared to 8,329 in April, 2006. Until we can find a competition for gasoline we are beholden to the one energy that drives us. Driving the Nation
The Department of Energy says that Motor gasoline consumption growth is projected to average 1.2 percent per year, reflecting continuing economic growth. Gasoline consumption has been increasing only 1.2 to 1.5% per year or so. Howe’ver, according to the EIA forecast, oil production will increase in 2008. We know the long term problem faced by the Western and developing worlds (too many cars and not enough domestic oil or gasoline).
Average domestic crude oil production is expected to decrease by 30,000 bbl/d, or 0.6 percent, in 2007, to a level of 5.1 million bbl/d. In 2008, a 4.3-percent increase is expected, resulting in an average production rate of 5.3 million bbl/d. Much of the expected increase in domestic crude production comes from startup of the deepwater Gulf of Mexico Atlantis platform in late 2007 and the Thunderhorse platform in late 2008.
We will have more crude later in the year, but if we don’t have the refineries to refine our crude our gasoline prices will continue to go up. Unless we start conserving.
Driving the Nation
Lou Ann Hammond

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a founding member of the Women's World Car of the Year #WWCOTY, and board member of the Women in Automotive.

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