I’ve said before that Spring fuel price rallies often demonstrate the physics associated with applause. The trading community always greets the oncoming gasoline “season” with enthusiastic hands-a-clapping, and occasionally there is a standing ovation. We are witnessing the latter at the moment.

   Nationwide fuel prices hit $2.82 gal this morning, and five states - - California, Nevada, Washington, Oregon, and Hawaii - - now have average pump prices of over $3.00 gal. The nationwide number is about 10cts gal above where it was a year ago. The western numbers are in some cases 30-40cts gal higher than in early April 2006.

   One might call this the “Sanjaya Rally,” a reference to the improbable longevity of the least talented singer on American Idol. Prices keep creeping up even as credible analysts, including yours truly, continue to suggest that rational behavior dictates that we are not far off from a day of reckoning. And like the Sanjaya phenomenon - - there are various conspiracy theories getting tossed around to account not so much for the initial lift-off, but instead for the remarkable and questionable staying power.

   The saga of late Winter and early Spring refinery woes continues. Profit margins for refiners are three or four times the historical norm. If you run sweet crude east of the Rockies - - and if your refinery is working properly - - you are making somewhere between $25 bbl and $30 bbl on your gasoline sales. If you operate on the West Coast, and run Alaska North Slope crude, you can sell that gasoline for $113 bbl, even though the cost of crude is about $40 bbl lower. These incredible margins - - lifted by market forces that have much to do with globalization and the notion of oil futures as an “asset class” - - may be downplayed when refinery CEO’s release first quarter earnings in the last week of April.

   But take notice. The current relationship between gasoline and crude is akin to the marriage several years ago between Charlie Sheen and Denise Richards. It is doomed and cannot possibly be long lasting. (Note: the author believes that Ms. Richards should have received Oscar consideration for her roles in Undercover Brother and Wild Things). But like the Sheen/Richards nuptials, doomed relationships can persist far longer than one initially believes are possible.

   Predicting the path of retail gasoline prices in the next few days is quite easy. Wholesale prices have advanced by anywhere from 10-35cts gal across the country (the largest spike took place in, you guessed it, California). When wholesale surges, retail has to move higher and it will do so in the next few days.

   So for the second time this year, I have to take a mulligan. In late January, I noted when crude oil prices descended to $49.90 bbl, that my prediction of a $50-$70 bbl range for 2007 crude had to be amended. We spent only a few moments at $49.90 bbl, but the integrity of the prediction was breached for those few seconds.

   I had thought that $2.75-$2.80 gal would represent the ceiling for the preseason “petronoia” rally, and that ceiling clearly needs to be raised. I still believe we are in the late stages of an overreaction, but the market has enough mojo, and enough catching up to do, to put $2.90 gal well within the target high.

   I can take some consolation in the early January caveat that I included for the West Coast. Fuel prices there have become disconnected from the rest of the country, and that disconnect is now about as wide as it’s ever been. If you are a gasoline retailer and you need to buy fuel in California this weekend, the product will cost you about $2.80 gal, before taxes, freight, and a consumer mark-up are calculated.

   If you’re a California motorist, think of it this way. A single tanker truck of gasoline (about 7500 gal) that passes you on the highway, costs the gasoline retailer about $25,000 (that includes the various taxes). Earlier in the decade, that same truckload of fuel cost less than $10,000. Precious cargo, indeed.

   I still believe that the rest of the nation will see a considerable correction in currently excessive prices in the next 15-90 days. But we’ll need some smooth refinery operations to restore sanity and stability. We’ll also need a more solid contribution of offshore gasoline, which always represents the cavalry that bails out the East Coast from supply problems year after year.

   But I’m worried, as are most of the merchants who sell gasoline at their stations. If you don’t make it (gasoline, that is) and you sell it, April represents the dark ages for retailers, even as producers and refiners continue to extend their renaissance.