The Car and Truck Fleet and Leasing Management Magazine

Gasoline at $4/Gallon Coming to a Pump Near You

April 24, 2007

NEW YORK – Fuel prices are rising at a pace not seen since Hurricanes Katrina and Rita knocked out a third of the U.S. oil refining industry in 2005, according to Bloomberg. Gasoline consumption is climbing twice as fast as last year and will accelerate when summer travel begins late next month.

Population gains and U.S. economic growth are causing an increase in fuel purchases, according to Orlando, Fla.-based American Automobile Association (AAA). The U.S. economy will expand at a 2.4-percent annual pace in the second quarter, up from 1.8 percent in the first three months, according to the median estimate of 74 economists surveyed by Bloomberg. Gasoline use is rising almost 5 percent above the five-year average.

Gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures, and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.

Pump prices in the U.S. may increase to $4 a gallon from a nationwide average of $2.87 today, especially if hurricanes threaten Gulf of Mexico refineries, the report said.

The increase in fuel costs threatens to quicken inflation and restrain consumer spending in the U.S. An appreciation to $4 a gallon would add more than $10 for a driver who fills the 12-gallon tank of a Toyota Motor Corp. Prius. The owner of an Expedition, a Ford Motor Co. sport/utility vehicle with a 34-gallon capacity, faces an increase of almost $40.

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