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Nuts & Bolts

February 7, 2013

Gasoline prices surge for third straight winter

Here we go again. For the third straight winter, retail gasoline prices have accelerated.

The national average price of self-serve regular is over $3.54 a gallon, according to AAA. It's up 15 cents in a week and 25 cents in a month.

In case you've forgotten, the same thing happened in early 2011. At the time, the increase was attributed to worries in the market that political instability in Libya would lead to supply shortages.

In 2012, when prices shot up again, it was blamed on tensions with Iran over its nuclear program. The worry was that any kind of Persian Gulf dust-up would interrupt oil supplies.

No Middle East turmoil

This year, there's a shortage of oil-producing Middle East tensions but that has not prevented retail gasoline prices from making their annual February surge. So what's to blame for this year's pain at the pump?

According to a consensus among industry analysts, this year's price rise is mostly to be blamed on U.S. refineries shutting down for scheduled maintenance. In other words, a completely foreseeable and, perhaps, controllable set of circumstances has caused the market to spike.

Other reasons that have been given for the sudden increase in price is optimism about economic recovery, even though the economy declined in the fourth quarter. Also, the fact that refineries, once they are operating again, will be switching over to summer-blends, which are more expensive.

However, consumers with long memories will recall that these annual occurrences rarely seemed to result in the big price increases we have seen over the last three winters.

Don't blame the service stations

It's useful for consumers to also remember that their local service station operator is not to blame for the price at the pump. The station buys the fuel from a wholesale distributor, who obtains the product on the open market. Beginning last month, that market has been very active.

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