U.S. consumers this week may pay about $100-million more each day for gasoline than they paid during the week of the President’s State of the Union Address.  Pump prices are up by more than 20cts gal since that late January week, and the gap could easily grow to 30cts gal by next weekend. The sharpest increases have occurred on the U.S. West Coast and in the Midwest, but every nook and cranny of the country has seen a huge upwelling. This should continue, with relatively few interruptions, well into March. This week we will probably see the last sub-$2.00 gasoline prices disappear - - in places like south Texas and South Carolina - - and we’ll see headlines about prices breaking above $3.00 gal in California and Hawaii.

   This forecast should hold even if crude oil and gasoline futures give up some ground in the global markets.  Wholesale prices are up 20-50 percent since January 20, and we are looking at several weeks of “catch-up” moves from retailers, even if spot markets and futures cool.  Gasoline sales are currently not profitable for a huge swath of the country’s 160,000 or so stations, and every state is impacted by the ongoing margin squeeze. For many small retailers, it’s a question of “Do I raise my price? Or, do I go out of business?”

Some items to keep under surveillance in the next few weeks:

-          - Gasoline demand is incredibly high for Midwinter. Americans used about 386-million gal of gasoline each day last week.  That compares with a late February rate of 353-million gal just four years ago, an increase of more than 9 percent.  I believe that we’re seeing unsustainable “lift” in demand, but if I’m wrong, this year’s price rally could match or exceed the increases in 2005-2006.

-          Quite a few refineries are scheduled to return from maintenance pit stops in the next five weeks. Restarting refining units is a tricky business, and that’s when production is most prone to various upsets. There is tremendous motivation to get production back and take advantage of refining margins that are two or three times what was common in the winters of say, 2000-2003.

-          Keep an eye on Venezuela next month. President Bush has a high profile Latin American tour that will begin on March 4, and the visits to South and Central American countries will provoke Venezuelan President Hugo Chavez.  Mr. Chavez does not appear to have much of a diplomatic filter for his rhetoric, and there could be some stormy exchanges between the two countries.  Those exchanges could lift prices.

-          Last year, the U.S. passed the $1-billion day mark for its daily gasoline bill right around April 1.  Thanks to higher demand this year, it will take a retail price of about $2.56 gal to cross that threshold in 2007.  So, we’re within 20cts gal or so of that level.  I suspect we’ll flirt with the $1-billion level during the NCAA Basketball tournament.

OPIS Oilmanac  - - This Day Through the Years

                                      (February 26,)

Year                             Avg. Retail Price               Daily Gasoline Bill

2001                               $1.459 gal                           $356.5-million

2002                               $1.126 gal                           $415-million

2003                               $1.661 gal                           $587-million

2004                               $1.681 gal                           $633-million

2005                               $1.903 gal                           $710-million

2006                               $2.240 gal                           $852-million

2007                               $2.351 gal                           $907.5-million