If price trends hold true, gasoline can only go up

www.indystar.com By Brad Foss The Associated Press March 1, 2003   If history is any guide, consumers should brace for even higher gasoline prices, which already are above $2 a gallon in some places. The wholesale price of gasoline has risen from March to May every year since 1985, according to an analysis by Cameron Hanover, an energy risk management firm based in New Canaan, Conn. Pump prices have tended to follow suit, statistics kept by the Energy Department show. "We're expecting a further round of price increases at the retail level," said Jacob Bournazian, an analyst at the Energy Information Administration, the statistical arm of the Energy Department. "It could be anywhere from 4 to 8 cents." The national average retail price for regular unleaded last week was $1.66 per gallon, 54 cents above year-ago levels. In Indianapolis, self-serve regular was selling at an average $1.67 a gallon on Friday, according to AAA Hoosier Motor Club. The springtime pattern of rising prices coincides with the period when refiners shut down equipment, scrub it clean and switch from winter- to summer-grade fuel. That process, known as "turnaround," causes supplies to shrink temporarily and prices to rise. Whether the 18-year seasonal trend is extended -- or ended -- in 2003 depends on factors ranging from a possible war in Iraq to the supply from Venezuela, whose oil industry strike has resulted in sharply reduced exports. If U.S.-led military action against Iraq proceeds quickly and without any disruption in the flow of Middle East oil, analysts believe the price of crude, now close to $37 a barrel, could drop quickly, bringing today's high gasoline prices down, too. "That could kill the (seasonal) trend," said Ed Silliere, an analyst at Energy Merchant LLC in New York. The ability of refiners in the United States, Europe and elsewhere to make up for the expected shortfall from Venezuela also could tip gasoline prices either way, Silliere said. Still, analysts say all signs point to the annual trend being magnified by geopolitics and the current supply-demand imbalance. Nationwide inventories of gasoline are nearly 3 percent below year-ago levels with Venezuela's refineries running far below capacity, and analysts said the situation could get worse. Peter Beutel, president of Cameron Hanover, said the confluence of outside factors makes it difficult to predict what will happen in gasoline markets, but his advice to clients is this: Don't make large bets prices will fall. In 16 of the last 18 years, June futures trading on the New York Mercantile Exchange rose from March 1 to May 15. In 1993 and 1998, the June contract rose from March 1 to May 1, before falling two weeks later. Gasoline for April delivery was up 2 cents to $1.04 a gallon Friday. The monthly average for retail prices was higher in May than in March in 15 of the last 18 years. Pump prices declined slightly in 1986, 1997 and 2000.