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Oil, Gas Prices Rise on Short Supply

Posted on: Thursday, 16 March 2006, 00:00 CST

By Tom Incantalupo, Newsday, Melville, N.Y.

Mar. 15--Homeowners and motorists got bad news yesterday as futures prices of crude oil, gasoline and natural gas rose and the American Automobile Association said gasoline at the pumps on Long Island rose by three cents in the past week.

For gasoline prices, at least one expert thinks this is just the beginning of a runup that will peak around Memorial Day weekend and again around Labor Day. "I think there are parts of the country that could see spike highs approaching $4 a gallon," said Mark Routt of Energy Security Analysis Inc., a consulting firm in Wakefield, Mass.

Among his reasons: In the short term are shutdowns of refineries for maintenance or repairs, including part of a facility in St. Croix, the Virgin Islands, that's a key supplier to this region. Longer term, will be a switch by refiners, largely voluntary, from the polluting MTBE to ethanol, a corn product, as an octane booster in gasoline. The shift, mandated by law last year in New York, will increase demand for -- and the price of -- ethanol, he said. "The supply pool just didn't increase overnight but the demand did," he said.

In trading on the New York Mercantile Exchange, gasoline for April delivery rose 12.27 cents yesterday, to $1.866 a gallon, which Bloomberg News reported was the highest closing price since Oct. 5 and the biggest one-day gain since Sept. 28. The type of gasoline sold in New York, "reformulated" fuel designed to be blended with ethanol, rose by 7.89 cents to $1.9489 a gallon.

Locally, the AAA said regular unleaded gasoline averaged $2.492 a gallon on Long Island yesterday, compared with $2.461 a week earlier.

Even the bright spot for consumers -- a small drop in heating oil prices -- was shadowed by the prospect of low temperatures pushing them back up. New York State reported yesterday that heating oil at retail on Long Island fell by 3.7 cents in the week ended Monday to an average of $2.661 a gallon -- still 35.7 cents higher than a year earlier. Prices had been rising slowly but steadily since mid-February.

The decline could halt and even reverse itself, experts said, with cold weather that was expected to move in last night. "For the balance of March -- the next couple of weeks -- we're looking at much below normal temperatures," said meteorologist Chris Hyde at MDS EarthSat Energy Weather, a Rockville, Md.-based private forecaster.

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Source: Newsday, Melville, N.Y.

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