Gas Pump Prices to Shatter Records
NEW YORK — Regular gasoline pump prices in the United States may average as high as $2.50 by Memorial Day, shattering the records as futures prices climb to new peaks, analysts said on April 1, in a report by Reuters.
U.S. retail gasoline is already running above $2.15 a gallon, well beyond last spring's peak of $2.05, according to government and industry surveys.
Gasoline futures on the New York Mercantile Exchange (NYMEX) hit a record on April 1 of over $1.70 a gallon, keeping stride with a spike in the cost of crude as soaring global energy demand threatens to outpace supply. While it is difficult to predict pump prices based on futures traded on the NYMEX, the increase will probably get passed on to motorists, with prices running up to $2.50 a gallon in the next month, said Ed Silliere, analyst with Energy Merchant Intermarket Futures.
The U.S. Energy Information Administration uses spot — physical — prices to predict retail prices, and the NYMEX is the benchmark off which spot prices are calculated, said Mike Burdette, analyst with the EIA. U.S. average retail prices generally are 60 cents to 65 cents higher than spot prices, which on April 1 were running about $1.70 a gallon in the U.S. Gulf Coast. Friday's spot prices, Burdette said, would predict average retail gasoline prices of $2.30 to $2.35 per gallon, but only if the spot price stays put for at least several days.
Pump prices in California on April 1 were 30 cents higher than the national average, according to the AAA's survey, and further spikes could send prices close to $3. California tends to have higher prices than other states because of more stringent environmental rules governing fuel that out-of-state refiners have trouble meeting.
While soaring prices have yet to show an impact on fuel demand in the United States, that could be coming soon, IFR's Evans said. He pointed to the third quarter of 2004, when high gasoline prices helped lower year-on-year demand growth to 0.4 percent, less than the rate of population growth. Current gasoline demand is running about 2 percent higher than last year, according to government figures.
Evans said that if 2005 plays out like last year, the record high prices could hit before peak summer driving demand kicks in, and ease by July. “Overall, I think that means we could see retail gasoline prices rise to the $2.30-2.40 level on a nationwide average, but that they would fall back to less than $2 by the 4th of July,' Evans said.