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gas prices climb sharply


Nationwide Average Up 24 Cents to $2.91 a Gallon

NEW YORK (April 23) - The average U.S. retail price of gasoline surged about 9 percent over the past two weeks, pumped up by higher crude oil costs as well as regulatory ethanol-blending requirements, an industry analyst said.


Rising crude oil prices and tight supplies of ethanol, which is being phased in as an additive, are blamed for the ongoing gas price spike.


The national average for self-serve regular unleaded gas was $2.91 a gallon on April 21, up nearly 25 cents in the past two weeks, according to the nationwide Lundberg survey of about 7,000 gas stations.

Nearly all of that increase came as benchmark U.S. crude futures surged $8 a barrel over the two-week period, Lundberg said, reaching $75.17 on Friday amid strong demand and fears of supply disruptions in exporting countries like Nigeria.

Yet prices at the pump also reflect the higher cost of delivering and blending ethanol into gasoline, as mandated by federal and state laws designed to combat air pollution.

"Not only are these costs higher than for the additive ethanol replaced, MTBE, but ethanol is also in tight supply," analyst Trilby Lundberg told Reuters on Sunday.

Lundberg also noted several U.S. East Coast and Texas cities reported "spotty outages," where gasoline sales were halted as service stations waited for deliveries of ethanol-blended product.

Ethanol, which is produced from corn and other crops, helps reduce emissions that contribute to smog. MTBE, a chemical that had been used for the same purpose, is being phased out after being linked to drinking water contamination.

But ethanol costs refiners and retailers more because it has special transportation and blending requirements. The replacement of MTBE also comes as refiners must upgrade their production facilities to comply with low-sulfur regulations.

Moreover, U.S. ethanol supplies are tight, Lundberg said, a situation she blames on steep tariffs on imports from foreign producers like Brazil.

"It's a de facto barrier," she said.

At $3.12 a gallon, San Diego had the highest average price for self-serve regular gas, while the lowest price was $2.54 a gallon in Boise, Idaho. Gasoline exceeded $3 a gallon in cities in five states plus Washington, D.C.

On a national basis, regular unleaded is up nearly 67 cents or 30 percent from a year ago. Still, it is 10 cents shy of the all-time high of $3.01 reached last September, in the aftermath of Gulf of Mexico storms that disrupted oil and gasoline production.

And as high as prices may seem, the average price last week is still 15 cents below the record inflation-adjusted high of $3.06 reached in March 1981, Lundberg said.

Entry #397


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