Ask the Fuel Expert

There’s a clue to this year’s gasoline prices in last year’s pricing anomaly.

At the end of December 2010 the average price of gasoline in the U.S. was $3 per gallon, forty cents higher than the $2.60 per gallon price posted on the first day of 2010.

By comparison, crude oil prices were $66 at end of December 2009 versus $92 per barrel on December 31, 2010. This should have made the price of gasoline $3.25 per gallon, That calculation is based on dividing the difference of $26 in the per barrel price by 42, the number of US gallons in each barrel of crude oil, which equates to 65 cents per gallon. When 65 cents is added to the $2.60, the price of gasoline at beginning of the year 2010 should have been $3.25 per gallon. That is the price gasoline could have been if all the increases in crude oil prices would have been passed along to the consumer.

My forecast is that the additional 25 cents per gallon will not disappear and instead be passed along to the consumer at the pump in the next two months. This is in view of the oil refineries going into their Spring turn-arounds by March 1, 2011 in order to start producing the lower Reid Vapor Pressure summer type gasoline. Fuel supplies will tighten up with subsequent price increases to follow.

Canada will follow suit and see both gasoline and diesel prices run up. Some oil company executives are suggesting prices of $1.40 to $1.50 per litre this year.