Gasoline prices may be about to spike

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Gas market headed for time of year when prices ‘can jump very quickly’

Americans are likely to spend about $27 billion less on gasoline this year than last, but prices are set to spike as the spring refinery maintenance season kicks in.

The average U.S. price for a gallon of regular gasoline stood at $1.806 late Friday, according to GasBuddy.com. That’s down 23.6 cents from last year’s average of $2.042 a gallon.

But prices have a ways to go before they hit their peak this year, according to Tom Kloza, global head of energy analysis at the Oil Price Information Service.

He sees a high around $2.50 a gallon for gasoline this year, and it won’t necessarily be because of a rally in crude. He thinks a “substantive meeting between delegates from Russia and OPEC is as likely as a substantive meeting between Donald Trump and Rosie O’Donnell.”

Even so, Michael Green, a spokesman for AAA, said that if crude stabilizes above $30 a barrel, “then most drivers may soon pay more at the pumps.”

“We are entering the time of year when gas prices can jump very quickly,” Green said. “ It’s common for gas prices to jump this time of year as refineries conduct seasonal maintenance, which means the days of paying less than $2 for gas might be numbered.”

Kloza said that gasoline may rally, in part, “thanks to money flow with speculative funds, hedge funds, algorithmic investors … chasing April or May futures higher because of upcoming refinery turnarounds, [a] slight year-on-year demand lift, and the difficulty in making spring/summer gasoline specification of gasoline.”

Futures prices for gasoline may even trade at twice the value of crude-oil futures—with a $1.78-a-gallon reformulated gasoline futures equal to about $75 a barrel, he said. “We may indeed see gasoline in the $70’s per barrel, with crude in the $30’s.”

On Friday, gasoline futures settled above $1.13 a gallon, while West Texas Intermediate crude finished at $33.62 a barrel.

Within days, retail gasoline prices may see an off-season low, maybe at $1.79-ish, and t hen prices may climb to something closer to $2.50 in the second quarter, he said.

“This wouldn’t be exceptional or unusual—it would simply match last year’s rally,” he said.

OPEC predicts an average price of $2.149 to $2.249 a gallon for gasoline. That would mean U.S. divers are set to pay about $306 billion for gasoline this year, compared with $333 billion in 2015, said Kloza.

By Myra P. Saefong, MarketWatch

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