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Despite market fears, US gasoline supplies appear adequate
By Julie Charpentrat
AFP
NEW YORK
Petroleumworld.com 04 30 06
Fears of a gasoline supply crunch in the US summer driving season, often cited as a major reason for the surge in prices, appear unfounded, with supplies expected to be ample, analysts say.
US motor fuel pump prices have pushed to near record highs amid growing concerns about the adequacy of supplies as demand peaks for the US vacation season.
Adding to general concerns about oil supplies are new environmental regulations that require refineries to switch to a gasoline blend with ethanol -- a grain-based alcohol -- instead of Methyl Tertiary Butyl Ether (MTBE), a fuel additive that helps increase the oxygen content of gasoline, because of health risks.
The average price for petrol, or gasoline, has reached 2.93 dollars per gallon (3.8 liters), about one-third higher than a year ago. Futures prices for gasoline are up 60 percent over the past two months.
But Fadel Gheit, analyst at Oppenheimer, said that "a general shortage is highly unlikely" under current conditions.
James Williams at WTRG Economics argued that "US refiners are fully capable of producing this blend."
In the past, he noted that some states banned MTBE in their gasoline "and refiners had to switch to meet the needs," so there is precedent for the changeover.
Bill O'Grady at AG Edwards points out that "the problem is that ethanol corrodes pipelines ... it must be added at the terminal, and cannot be added at the refinery."
"Thus it must be shipped further downstream, creating something of a logistical nightmare," O'Grady added.
Earlier this month, when crude oil futures hit a historic high above 75 dollars a barrel, Energy Secretary Samuel Bodman warned of possible shortages in the coming months as a result of the new environmental standards.
O'Grady said some service stations in Delaware, New Jersey and Pennsylvania have already seen shortages.
As a result, President George W. Bush's administration has proposed to allow the Environmental Protection Agency to grant waivers from the new environmental norms to avert a supply crunch.
The Energy Department's Energy Information Administration said that even if there is a supply squeeze, this should not last long.
"Increased domestic production, in addition to the expected continuation of significant gasoline imports, should be enough to cause prices to begin to fall again," the EIA said in its weekly report.
Also helping the situation is that many refineries damaged or shut down by hurricanes last year are coming back online. One of the latest was the BP Texas City refinery, now producing some 200,000 barrels daily.
Government figures show refineries were operating at 88.2 percent of capacity in the past week, up from 86.2 the prior week.
All this means Americans are unlikely to face a crisis when their fuel tanks hit empty.
Refiners "are making hefty investments to meet fuel standards on time," noted Katherine Spector, analyst at JP Morgan Chase.
AFP 30 04 06 1040 GMT
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