Crude oil prices, the switch to summer gasoline, a high demand
and a low supply are all responsible for the recent rapid jump in
gasoline prices at the pump.

The price of regular unleaded gasoline at 5 p.m. Tuesday at gas
stations throughout Bradford was $2.55 per gallon. The price is 29
cents higher than the average price in Western Pennsylvania at the
same time last year. The total rise in cost of gasoline over the
last four weeks is about 35 cents, according to information
supplied by a recent AAA Fuel Gauge report for Western
Pennsylvania.

Doug MacIntyre, senior oral market analyst with the Energy
Information Administration, said the price of crude oil plays a big
role in the price of gasoline.

“(The) first (factor) would be crude oil prices,” MacIntyre said
Tuesday. “The price went up $10 a barrel since January, which is (a
rise of) about 24 or 25 cents a gallon (of gasoline). Most of that
has already been flowed through to the retail pumps, but there are
probably a few (pumps) that still haven’t seen (the effect).
There’s a couple weeks lag (from the change in crude oil prices to
the change at the pump).”

According to a Gasoline and Diesel Fuel Update for January 2007
on the Energy Information Administration’s Web site, in a gallon of
regular gasoline, 54 percent of the price depends on crude oil with
20 percent on taxes, 15 percent on distribution and marketing and
11 percent on refining.

Harvey Golubock, president and chief operating officer at
American Refining Group in Bradford, said gasoline is produced from
crude oil and there’s a certain yield of gasoline from a barrel of
crude oil. He said the yield depends on the type and equipment of a
refiner, saying that larger refiners, such as United Refining Co.
in Warren, have the equipment to make gasoline and fuel at a much
higher percentage. He said ARG produces mostly lubricant oils and a
much lower percentage of gas and fuel.

Golubock said gasoline is a commodity product, driven by the
combination of the cost of processing and the cost of crude oil,
which he said is 80 or 90 percent of the product. He said the
processing cost depends on the size of the refinery.

“It varies from refiner to refiner,” Golubock said. “The larger
refiners have more processing equipment, which shifts the yield
pattern. Our yield patterns are set pretty much the rest of the
year.”

Larry Loughlin of United Refining Co. said every year the
gasoline prices are affected by the change to summer gasoline
production.

“I don’t think we’re ready for that just yet,” Loughlin said
Tuesday.

“Depending on the season, (refiners convert) to produce more
gasoline (in the driving season) and more heating fuel in the
colder times of the year,” Golubock said. “The heating season is
going to come to an end. In March or April, (refiners) will be
converting and building gasoline inventories.”

“The peak (in price) is in the spring and summer when people
drive more, mostly because of vacations,” MacIntyre said. “That
drives the prices higher. There’s also a slight difference in the
type of gasoline from winter and summer. It’s a little bit more
expensive to make (the summer gasoline). But this affects the price
by pennies. It’s hardly noticeable.”

According to the AAA Fuel Gauge, the price increase represents
an especially early and rapid rise in gasoline prices. Generally,
fuel prices have been spiking higher a bit later in the spring in
response to the approaching summer season.

MacIntyre also said the gasoline market itself has an effect on
the prices.

“Demand has been running at strong levels so far this year,”
MacIntyre said. “At the same time, supplies have been reduced, in
part because of some domestic refineries (who) have been
concentrating on making heating oil in the midst of the cold
weather.”

MacIntyre also said supplies from the import of gasoline
surplus, mostly from Europe, have dropped as well.

According to the AAA Fuel Gauge, the fact that prices have
increased so rapidly this early in the year could mean the industry
is a little ahead of itself in product pricing and that remaining
cost increases could be more muted between now and late May. The
early increase may even reflect an earlier change this year to
daylight-saving time.

On the other hand, the high prices could be a signal that
refiners are experiencing or are expecting more down time and
tighter gasoline inventories as they begin switching to summer fuel
production.

“As we move on out over the next several weeks, (the price of
gasoline) will increase even further,” MacIntyre predicted.

AAA reported that California and Hawaii are experiencing the
highest gasoline prices across the nation, with $2.927 and $2.851
per gallon respectively.