Gasoline prices remain on an extraordinary run. That run - - higher, of course - - will certainly continue for retail prices, but I expect it to calm for wholesale. Translation: although many states have average street prices some 15-30cts gal above where they stood on March 1, 2006, I don’t believe the market can match the performance of last March and April when prices approached $3.00 gal.

Still, March begins with the average nationwide retail price for unleaded gas at $2.409 gal. It rose 25.9cts gal in February, and is now about 15cts gal higher than on the same day last year.

 But March of 2006 brought a 40cts gal wholesale increase and street increases of 30cts gal.

We may match the retail gains, but March 2007 could be the most likely month for this year’s preseason peak. Here’s why:

   The greatest accelerant for this 2007 “petronoia” rally has been U.S. refinery woes.  As I’ve mentioned several times before, U.S. refiners must perform what I would call “pit stop” maintenance every couple of years, and late Winter represents the best opportunity to get the work done ahead of the driving season (which is itself a misnomer, since we really have a 52 week driving ‘season’ these days).

   There are many refineries that are returning from these pit stops in March, and many others that are taking their turn on pit row. (I’m not a NASCAR fan, but I would gladly wear a NASCAR jacket with multiple sponsorships, and appropriate compensation,  for my next TV appearance).

 So, March will be a revolving door for refiners, particularly in the first few weeks. There will be many wire service headlines that will move the futures’ markets, and gasoline futures’ prices represent the starting point for all U.S. wholesale prices.

  My instincts tell me that we’ll see the wholesale preseason peak this month, and my guess would be that April RBOB futures (the benchmark blend on the N.Y. Mercantile Exchange) will top out somewhere between $2.04-$2.10 gal, or about 17-23cts gal above current numbers.

Look To the Oceans For Help

   Whether I’m right in this measured prognosis may depend on what happens in the North Atlantic. Very quietly, there has been a considerable drop in the foreign cavalry of cargoes. The reason we have not paid $3.50 gal or even $4.00 gal for gasoline this decade is because we consistently get about 12 percent of our gasoline from overseas refiners.

   But the last four weeks have seen a stealth drop in gasoline imports. We imported about 910,000 bbl/day of gasoline in the last month, compared with 1.2-million bbl/day a year ago. Some of the gasoline is bypassing the East Coast and headed to California or the Pacific Northwest where prices are highest.

 We need more foreign gasoline in March and April, and my hunch is that we’ll get it.  If we don’t, I may have to reassess exactly how much mojo this 2007 rally may carry.

Latest Demand Numbers

 Yesterday, the Department of Energy released its weekly statistical bulletin, and once again, demand was off the charts.

 The four week demand number for all petroleum products was 21.8-million b/d, some 7.5 percent above the same period last year. (This is the kind of number appropriate for China, but not for the U.S.)  Some of the upwelling is due to double digit increases in residual fuel usage, but percentage increases for marquee products like gasoline, diesel, and jet were impressive as well. Gasoline demand in the last four weeks is up 3.6 percent; distillate demand is up 9.7 percent; and jet fuel demand is ahead 4.5 percent compared to last year.

   We continue to believe that these numbers are misleadingly high or downright flawed, but that measured view may not prevail among gasoline traders. If they believe the numbers, or if the numbers are indeed accurate, oil prices are headed much higher.