In the News
Gas prices climbing rapidly -
California drivers see 13-cent increase in just one weekSan Francisco Chronicle
David R. Baker, Chronicle Staff Writer
January 11, 2006
The reprieve at the gas pump is over.
After a months long slide, gasoline prices throughout California and the rest of the nation have bounced back up in recent weeks. California drivers paid on average $2.36 for a gallon of regular, a 13-cent increase in the last week, according to the AAA of Northern California auto club. San Franciscans now spend about $2.29 per gallon, up about 11 cents since the turn of the year.
The nation's average, for once, isn't much different from California's -- $2.32 for a gallon of regular, or 14 cents higher than it was a month ago. While unpleasant, the higher prices aren't a surprise.
Industry analysts considered autumn's steep slide almost a fluke, driven more by a flood of imported gasoline than by changes in the price of crude oil. After last summer's Gulf Coast hurricanes, overseas refineries poured gasoline into the United States to take advantage of record high prices. The sudden glut forced prices down.
The flood has now ebbed, although it hasn't receded completely. Gasoline prices, which often rise in January anyway, have rebounded with zeal. They will probably rise more, analysts warn.
"Gas prices for '06 look to be more volatile than they were in '05, which for a lot of people is no great relief," said Ted Harper, energy analyst with Frost National Bank in Houston.
Several forces could drive prices higher.
-- Refineries. Gasoline refineries often perform maintenance at this time of year, cutting output.
In addition, some Gulf Coast refineries haven't fully recovered from hurricanes Katrina and Rita. Refineries were struggling to keep up with the demand for gas before the storms, so any drop in their output can trigger changes at the pump.
"If you see a refinery go down, it could cause ripples," Harper said.
Then again, he added, some of the damage caused by the hurricanes should be repaired by February or March, possibly pulling gas prices down or restraining any increase.
-- Crude oil. Crude prices have relaxed in the last week. But they remain high by historic standards, and many analysts expect them to stay there. The federal government, for example, forecast Tuesday that crude would average $63.27 per barrel for the year, up from last year's average of $56.49. Increased production should eventually bring that figure down, but not until 2007, when the government projects an average of $59.74 per barrel.
Geopolitical problems also could play havoc with the price. The fight over Iran's nuclear ambitions, for example, has unnerved traders who keep a close eye on anything that could disrupt the flow of Middle Eastern oil.
"Iran -- that's going to keep the market edgy," said Linda Rafield, senior editor with the Platts energy information service.
-- Demand. For a time after the hurricanes, analysts thought they saw signs that Americans were cutting back their gasoline use. Now, demand is rising again, with the U.S. Energy Information Administration predicting that the nation will burn 1.7 percent more gas this year than in 2005.
"We're a pretty determined, consumptive people," said Mike Gordon, founder and president of ConsumerPowerline, an energy assets management firm.
E-mail David R. Baker at dbaker@sfchronicle.com.
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