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More than four months ahead of the summer driving season, many experts are already betting that gasoline prices will steal the headlines away from oil in 2006.
CBS Marketwatch reports that the price for a gallon of regular unleaded gasoline stood at $2.224 on Jan. 3 – around 40 cents above the year-ago level and just over 80 cents below the record of $3.057 from Sept. 5, according to AAA’s Daily Fuel Gauge Report.
“This is the highest retail prices have ever been at the start of a new year,” said Geoff Sundstrom, a spokesman for motorists group AAA.
It’s true there have been “several unique occurrences” that have fueled the price climb in recent years, including the invasion of Iraq in 2003, Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in 2005, Sundstrom said.
But two factors seem to have become “constant” – continuous global economic growth and an ever-increasing demand for petroleum, and the “constant vulnerability of the global petroleum supply chain” from some of the world’s top oil-producing regions, he said.
With that in mind, it appears likely that crude-oil prices will remain above $50 a barrel in 2006, “presumably setting the stage for another year in which gasoline prices ratchet higher,” Sundstrom said.
So the “story in 2006 probably won’t be about crude,” with inventories apparently comfortable for now, said Tom Kloza, chief oil analyst at the Oil Price Information Service.
The “ingredients that came together and forged a secular bull market for transportation fuels in 2005 are still in the mix, and there are new factors that will create more upward wind speed in the next ten months,” he said.
Fuel prices typically surge in the spring as refineries cut production to make the switchover to producing “boutique gasolines,” Sundstrom said.
He explained that many refineries have to stop producing gasoline for brief periods in the late winter and early spring to convert to the output of “environmentally-friendly, warm-weather fuels.” That usually leads to higher prices at the pump from March to May, Sundstrom said.
In addition, refineries are still repairing facilities as Kloza noted the market “will soon be commencing what (the Oil Price Information Service) suggests (may be) the most extensive first quarter refinery maintenance period on record.”