The Car and Truck Fleet and Leasing Management Magazine

Seasonal Demand, MTBE Removal Costs Spur Jump in Gasoline Prices

March 24, 2006

WASHINGTON, D.C. --- The U.S. average retail price for regular gasoline jumped by 13.8 cents per gallon between March 13 and March 20 --– the third-largest weekly increase ever recorded by the Energy Department’s Energy Information Administration (EIA) since it began tracking weekly retail prices in 1990. The EIA attributed the recent price surge to seasonal demand as well as new costs associated with the removal of methyl tertiary-butyl ether (MTBE) from gasoline. “The rapid switch from MTBE to ethanol could have several impacts on the market that serve to increase the potential for supply dislocation and subsequent price volatility on a local basis,” the EIA said. “This uncertainty about future supplies and concern about the logistics of blending ethanol RFG (ethanol must be transported and stored separately from the base gasoline mixture to which it is added until the last step in the distribution chain) appears to be causing wholesalers to buy more gasoline now than they may have done otherwise.” By tracking the spot price of gasoline in various markets across the U.S., the EIA inferred that wholesale prices have jumped by nearly 50 cents per gallon since mid-February. But retail prices are expected to stabilize in the short-term. “Now that wholesale prices appear to be flattening, we would expect retail prices to remain close to current levels, given the typical difference between spot prices and retail prices," the EIA said. "This would imply that retail prices could be near their short-term peak. Of course, this could change if spot prices were to increase again.”
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