Pump Prices in State Rise Amid Summer Supply Worries

Retail gasoline prices in California jumped higher for the fourth week in a row, rising 3.4 cents to an average of $2.669 a gallon Monday, as some analysts warned that uncertainty over summer supplies could spur further increases at the pump.

The price hike in California, where the retail average is up 23 cents since the end of February, came as the cost of self-serve regular gas eased slightly nationwide, according to the U.S. Energy Department’s weekly price survey. The nationwide average fell less than a penny to $2.498 a gallon after a monthlong run-up, the survey showed.

John Kilduff, senior vice president at commodity trader Fimat USA, said he believed that retail prices across the country would head higher.

“I think there’s going to be more pain at the pump,” he said, adding that his research suggested “that there’s 10 more cents to go on the upside.”

Kilduff and others cite deep concern about supply among futures traders on the New York Mercantile Exchange, where the cost of gasoline for April delivery swung wildly Monday before settling at $1.829 a gallon, up 0.56 cent. Gasoline futures are up more than 44 cents a gallon since mid-February.

Oil prices are not the issue, analysts said. After four days of moderate gains, U.S. benchmark light sweet crude for April delivery fell 10 cents Monday to $64.16 a barrel. Inventory data show that U.S. oil stockpiles have been on the rise in recent weeks as the nation’s refineries slow fuel production to perform seasonal maintenance.

The problem, analysts say, is an expected surge in the use of ethanol in gasoline in the next few months. Many refiners are choosing to use the corn-based gasoline additive in place of methyl tertiary butyl ether, or MTBE, during the summer driving season. In switching from MTBE, refiners cite a growing risk of lawsuits over use of the additive, which has been blamed for polluting groundwater and is banned in California and other states.

Because of the ban here, which went into effect in 2004, California refiners don’t face direct supply or distribution problems related to ethanol. But snags elsewhere could boost prices for the additive.

“I don’t think anybody in the industry believes there’s enough ethanol to go around,” Kilduff said. “It seems likely that we’re going to see some problems, and I think the administration is going to have to do something to normalize the supply of gasoline.”

He said the government could take steps similar to those after Hurricane Katrina last year, such as waiving certain emissions restrictions and easing import rules.

Last month, a report by the Energy Information Administration suggested that ethanol supply and distribution snags could make gasoline prices volatile and push them higher this summer. A separate report by the agency last week reiterated the potential for supply disruptions because of the ethanol switch, but it also suggested that “a sharp increase in retail prices ... does not appear on the immediate horizon.”