Monday, March 12, 2007

Higher gasoline prices - It's springtime

I get a lot of questions this time of year on why gasoline prices are going up. Lynne Kiesling over at Knowledge Problem in recycling and updating a post of hers from 2004 on just this phenomenon.

It covers all of the normal stuff – higher crude oil prices, more inelastic supply due to environmental regulations, and the effects of the new sulfur regs.

She doesn’t note another yearly phenomenon, the annual turnarounds (major maintenance projects) refineries do at this time. Another reason this year – gasoline demand is up earlier than usual.

Just so you can take note, I think prices will hit $3.50 a gallon this summer in Phoenix. If there is a real supply disruption, the sky's the limit. Check back in the fall to see how my prediction holds up.

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