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Expert: No fuel shock in 2007

By BY SCOTT BARANCIK Times Staff Writer
Published December 30, 2006

When news reporters and government officials need perspective on gas prices, many turn to Tom Kloza, chief analyst for the Oil Price Information Service. On Friday, the New Jersey resident posted his 2007 forecast on his blog, www.speakingofoil.com.

The skinny? No gas apocalypse in 2007, Kloza says. Some highlights from the report:

RETAIL GAS PRICES WON'T HIT RECORD HIGHS IN 2007. Don't believe "experts" who warn of $4-a-gallon gas but have a financial or professional interest in saying so. In the absence of major surprises - a recession, a fierce storm toppling a U.S. refinery, the discovery of oil in South Tampa - gas prices are unlikely to reach the record one-day U.S. high of $3.057 per gallon.

SPRING PRICE INCREASES WILL BE LOWER THAN USUAL. Prices almost always begin rising around March, when U.S. refineries switch from winter blends to more expensive - and more environmentally friendly - spring blends. But the absence of ingredient revisions this year may shrink the bump slightly. Folks in the eastern U.S. can expect a gallon of unleaded gas to reach anywhere from $2.50 to $2.80.

ETHANOL USE COULD TAMP DOWN NORMAL SPRING INCREASES EVEN MORE. Florida and other southeast states are expected this year to add more ethanol, a cheaper alternative to petroleum, to their gas mix.

But a Tampa company's plans to build the state's first large-scale ethanol plant took a hit this week. See story, Page 1D

SUMMER PRICING SHOULD STAY FLAT. Hurricane fears could cause temporary rises of 5 to 20 cents per gallon this year, but Kloza says those increases will disappear once the hurricane season ends.

PRICES WILL PLUNGE IN THE FALL, AS USUAL. The switch back to winter blends, combined with the demise of hurricanes, should drive prices down.

CRUDE OIL PRICES WILL CREEP HIGHER. Why will the price of crude - the raw stuff that refineries turn into gasoline - rise even if pump prices don't? The "steroid" impact of commodity futures.

Pension funds and other institutional investors are pouring huge sums of money into them as a hedge against oil-driven inflation.

Scott Barancik can be reached at barancik@sptimes.com or (727)893-8751.

[Last modified December 29, 2006, 23:57:25]