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Gas prices expected to near $3 per gallon before Memorial Day

| Saturday, May 8, 2010

Unleaded gasoline may cost a little less at the pump next week, but expect another price surge before Memorial Day, industry analysts said Friday.

Although the Gulf of Mexico petroleum leak is causing monumental environmental woes and an eventual crude oil supply problem, it has little to do with current gas prices the analysts said.

"Wall Street speculators were controlling the price of crude oil and gas and other products even before the oil platform fire," said Don Bowers, manager of petroleum for Superior Petroleum in Ross Township. "They ran up the prices and then, after the fire, they raised it even more," he said.

Sara Banaszak, an economist for the American Petroleum Institute, said some price relief can be expected, at least in the short term.

"Yesterday, the national average started to go down," she said Friday. "But the prices have been going up since the first of the year."

According to AAA of Western Pennsylvania reports, in the past week the cost of a gallon of self-serve unleaded gas in the region increased about 7 cents.

At-pump prices averaged $2.87 across this region for the week of April 27 compared to $2.94 for the week of May 5 and only $2.10 for May 5, 2009, according to AAA.

Multiple factors are driving at-pump gas costs including increasing worldwide demands and refineries operating well below capacity, said Kent Moore, director of Duquesne University's Energy Policy Research group.

U.S. refineries are operating at 10 percent below what they could produce because of high gas inventories, and that's elevating prices, Moore said.

Virtually all independent refineries and gas stations are gone. "The last major independent refinery now owns gas stations, too," he said.

China, India, eastern Asia, some parts of Africa and Russia are demanding more and more gas so there is more competition for it, Moore said.

However, that demand is being tempered by the worldwide financial crisis.

None of it bodes well for Western Pennsylvania.

"We don't have a refinery and we're at the end of the supply line," Moore said.

The AAA said the Gulf oil leak may result in the nation closing shipping lanes and that would add to the cost of oil, gasoline and other products.

Bowers predicts an equilibrium will be reached between now and Memorial Day unless something unforeseen causes a gas supply problem.

"It should be between about $2.79 to 2.89 next week across Western Pennsylvania and $2.89 to $2.99 until Memorial Day weekend unless something crazy happens," he said.

"We always have an increase for a week to a week and a half before a holiday," Bowers said.

There will be swings in price until the worldwide economy sorts itself out, he said.

Meanwhile, history shows that most drivers will still take summer vacation trips unless the price at the pump is more than $3 a gallon, he said.

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