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Regular gasoline is nearing $4 a gallon and could hit $5 a gallon

The average price in the U.S. was already soaring because of Middle East unrest, but the loss of 1 million barrels a day of refined fuel production in quake and tsunami-ravaged Japan could put further strain on drivers' wallets.

March 15, 2011|By Ronald D. White, Los Angeles Times
  • Gasoline prices are shown at a gas station in Del Mar, California March 9, 2011.
Gasoline prices are shown at a gas station in Del Mar, California March 9,… (Mike Blake / Reuters )

For California drivers, $4-a-gallon gasoline is right around the corner after an 8-cent increase in the average price during the last week. Can $5 be far behind?

Many analysts are predicting a sharp rise in energy prices, particularly on the West Coast, as refiners scramble to replace more than 1 million barrels a day in refined fuels production lost because of Japan's earthquake and tsunami.

"This will most likely test whether consumers are going to be willing to pay $5 per gallon for gasoline and diesel fuel in the U.S," said consultant Bob van der Valk, who tracks fuel prices for 4Refuel Inc., which helps companies buy fuel more economically for their fleets.

Compounding the loss of refineries, he said, "Japan will have to supplement their nuclear energy power production with coal, natural gas and oil-fired power plants" as that country's nuclear crisis continues to unfold.

West Coast refineries are the most likely supply source for the Japanese, experts say, which could reduce the amount of gasoline and diesel fuel available for U.S. drivers and businesses, possibly boosting prices that were already rising in response to higher oil costs.

Japanese refiners were assessing their import needs Monday for gasoline, kerosene, diesel and fuel oil, according to Platts, an energy information company.

Platts reported the shutdown of three refineries owned by JX Nippon Oil & Energy Corp. in Sendai, Kashima and Negishi as well as two in Chiba owned by Cosmo Oil Co. and Kyokuto Petroleum Industries; the ExxonMobil refinery in Kawasaki was operating at reduced capacity.

In all, nearly a third of Japan's 4.52 million barrels of daily production was out of commission, Platts said.

In California, drivers paid an average of $3.954 for a gallon of regular gas Monday, according to the Energy Department's weekly survey of service stations around the U.S. That was 8 cents higher than a week earlier and 89 cents a gallon higher than a year earlier.

The U.S. average rose 4.7 cents to $3.567. That was 78 cents higher than the year-earlier price.

Several experts who were once skeptical that U.S. gasoline prices would hit the $5 mark are changing their opinions.

"It would take a major disruption in supply to take us to $5 a gallon," said Phil Flynn, an oil analyst with PFGBest Research. "Three months ago, I would have told you it was impossible, but with the continuing troubles in the Middle East on top of the earthquake, $5 a gallon is less of a stretch than it was."

John Hofmeister, the former president of Shell Oil Co. who now heads the nonpartisan advocacy group Citizens for Affordable Energy, said that $5 a gallon was possible by 2012 because of factors that go well beyond Japan's disaster and the unrest in the Middle East and North Africa.

"I'd really rather be wrong, but this comes as China's daily consumption of oil is expected to increase from 9 million barrels a day to 15 million barrels a day by 2015," he said. "India is consuming 4 million barrels a day and heading for 7 million barrels a day. The U.S. consumes 20 million a day. Maybe it stays the same, maybe it goes to 21 million a day. Where is all of this oil going to come from?"

Oil futures initially fell Monday, touching $98.47 a barrel, but then rose to settle at $101.16, up 3 cents from Friday's close for West Texas Intermediate, the U.S. benchmark grade of crude. Brent North Sea crude futures for April delivery fell 17 cents to settle at $113.67 a barrel after trading as low as $111.16.

The seesaw resulted, traders said, from rising tension in the Middle East offsetting the expectation that Japan's thirst for petroleum would decline until refiners and manufacturers return to full production. Japan is the world's third-largest oil importer, after the U.S. and China.

In a race no state wanted to win, Hawaii became the first in the nation to top $4, according to the AAA's daily fuel gauge report. AAA's tally of average gas prices differs from the Energy Department's telephone survey, which includes all regions but doesn't break out each state.

Motorists in Hawaii were paying $4.001 on average for a gallon of self-serve regular gas Monday, AAA said, based on data compiled electronically from daily credit card receipts from more than 100,000 retail outlets across the U.S. The survey, which covers all 50 states, is conducted for AAA by the Oil Price Information Service and Wright Express.

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