California gasoline could soon hit $4 a gallon

4:53 PM, Jan 30, 2013   |    comments
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By Gary Strauss

Gasoline prices are on another seasonal rollercoaster ride, but for some parts of the country, the upward climb is swift and steep for now.

With crude oil prices rising and pump prices in the Midwest and California surging, the national average price of gasoline has climbed 10 cents to $3.39 a gallon since late December and could rise to $3.50 in February.

California motorists -- now paying an average $3.73 a gallon -- are likely to see an even bigger pop in coming days. Wholesale prices in Southern California surged about 17 cents Wednesday to $3.31 a gallon.

Prices have already surged 20 cents or more a gallon in Illinois, Indiana, Michigan and other parts of the Midwest.

"California is going to be hit much worse than other states -- and those prices come down the chain pretty quick,'' says Patrick DeHaan, senior energy analyst for price tracker DeHaan expects Southern California -- where refineries are switching to costlier summer blends -- to soon average $4 a gallon gas. Price spikes are also likely in the coming weeks in Northern California, Oregon and Washington.

Benchmark West Texas Intermediate crude oil traded at $98.05 a barrel Wednesday, the highest levels since mid-September. Prices have climbed eight straight weeks -- the longest streak since 2009, says Tom Kloza of the Oil Price Information Service.

The anticipated runup in California pump prices is a long-term pattern, he says.

"California bottoms before other markets,'' Kloza says. "In 30-plus years, there are virtually no cases where California gas prices didn't move up from (late) January to St. Patrick's Day."

With refinery woes curbing production last year, California prices surged to over $5 a gallon in parts of the state, with temporary shortages shuttering dozens of outlets.

Nationwide, gas prices typically peak before Memorial Day. Last year, U.S. prices topped at $3.94 a gallon April 5, but briefly spiked upward along the West Coast and Midwest later in the year, due to supply and refinery issues.

Richard Soultanian, co-president of energy cost manager NUS Consulting, is expecting lower overall 2013 prices. Based on weak consumer demand and rising domestic crude oil production, a protracted price runup isn't sustainable, he says.

"January prices are more robust than we expected -- and that's been a surprise,'' Soultanian says. "But if you look around the world, economic activity is contracting in Europe and is very sluggish in the U.S. The world is pretty well supplied with oil. Barring some geopolitical incident, we're looking at a fairly significant correction in prices somewhere in the first half of the year."

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