US gasoline prices reach all-time record; further surge expected

US gasoline prices reached an all-time high of $3.26 per gallon last week, according to the Lundberg Survey of 5,000 gas stations, as ethanol margins improved. The figures were an all-time high for gasoline, even after adjustment for inflation, but were tempered by lower crude oil prices last week. The Lundberg Report cautioned that spring high-season demand had not yet peaked.

Gasoline prices are expected to spike higher than $3.50 per gallon as blenders move from winter to summer gas formulations amidst a shortage of the alkylate additive which has replaced ethanol as the summer oxygenate additive of choice for many blenders.

Prices in selected east coast markets could approach $4 per gallon as blenders scramble for alkylate, which replaces MTBE as a an additive to reduce tailpipe air pollution from unburned oxygen. Ethanol is also used to boost oxygen, but has a high evaporation rate.

Back in 2001, the Renewable Energy Action Project warned California over committing to alkylates owing to the potential for price spikes.

At the time, REAP director Brooke Coleman said “Governor Davis is silent about the national shortage of alkylates, which have reached “extraordinary” price levels this year, according to the Energy Commission. It is even more worrisome that Davis appears unconcerned about the public health risks. Hydrofluoric acid, a key ingredient to alkylate production, is one of the most deadly chemicals in the world.

The oil industry is willing to roll the dice, in the same way as they did with MTBE, because alkylates are cost effective.”

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