Nationwide gasoline prices just ended a tidy 23 day streak where they averaged under $3.00 gal, albeit by a bare amount. The low water mark was the $2.9526 gal price reached on February 11.

   There will be some individual parts of the country that see some price decreases in the next couple of weeks, but for most states, the Winter lows are past tense. One could cite the hackneyed allusion to the “fat lady singing” at the opera, but I’d prefer to make mention of the big bottom. The 2007-2008 Winter produced a big bottom that would make Krispy Kreme, Drakes, and Hostess quite proud. It sets up record pump prices in the typical April & May period when petronoia will reign rampant among the teeming masses of traders, speculators, investors, and chain retailers that collectively comprise  “the market.”

   But first, some numbers to crunch. We have completed just over an eighth of 2008. The average pump price for regular unleaded for 2008 through this morning is $3.019 gal. Measured against 2008 demand numbers, motorists have spent about $1.15-billion each day, or an aggregate of nearly $56.2-billion. In the same period last year, the regular unleaded price averaged $2.3424 gal, or about $1.028-billion per diem for a total $43.2-billion. I’ll do the math for the economists: so far in 2008, consumers who drive have had about $13-billion less money to spend (on other items) than in 2007.

    Perhaps the tighter consumer wallet manifested itself this weekend at the cinema. I see that Paris Hilton’s fourth feature film - - The Hottie & The Nottie - - took in only $225,000 nationally, which adds up to about $225 per screen. In fairness, I may be extrapolating too much from this dismal dollar debut - - many of her fans may have simply read the classic novel from which the screenplay was derived.

   Back to the market. There is no question that this Winter’s big bottom has not been driven by high demand in the U.S. As I mentioned in a previous post, domestic gasoline demand is off from 2007 levels and may even struggle to keep pace with 2006 numbers. But world demand is a subject of guesstimation - - -I saw something last week that I haven’t witnessed in 32 previous years in this business. We exported some gasoline from the U.S. East Coast for destinations in western Africa.

    That evokes the larger energy question: Has global demand for gasoline, diesel, jet fuel, and heating oil eased in concert with the U.S.? We don’t have a clear cut answer at this point.

The Wholesale Template .. . .

    Retail prices follow wholesale trends. Wholesale prices for gasoline on February 7, 2008 were about 30cts gal lower than they will begin February 19, 2008. That is the major reason why we are witnessing higher prices making their way to traffic corners from California to the Atlantic.

   We also saw two refinery events over the recent weekend - - a power outage temporarily knocked out a Tesoro refinery in Hawaii (I hereby volunteer to check all of the extension cords on the premises) and a much more serious event has put the Winter/Spring production of a Big Spring, Texas refinery in doubt. An explosion and fire rocked the 70,000 b/d Alon refinery there today, but it will probably be several days before we get damage estimates.

   Accordingly, it looks like a safe bet to assume that the wholesale “big bottom” occurred on December 6 when gasoline futures slumped to about $2.19 gal. (The real time number for gasoline futures when this commentary was underway was about $2.52 gal).

    If one believes that previous 21^st century markets provide a template, then one can come up with some scary bounces from this bottom. Let’s assume you count the $2.19 gal futures price on December 6, 2007 as the “big bottom” of the 2007-2008 Winter/Spring market.  If you plug in various trajectories and peaks from previous yearly Spring rallies in this decade, here’s what you come up with:

    Starting Point:      Rally Template (year)           Scary Target Price

    -----------------      --------------------------            ----------------------

      $2.19 gal                88.0% (2000)                       $4.1172 gal

      $2.19 gal                63.2% (2001)                       $3.5740 gal

      $2.19 gal                82.9% (2002)                       $4.0055 gal

      $2.19 gal                69.6% (2003)                       $3.7142 gal

      $2.19 gal                89.4% (2004)                       $4.1479 gal

      $2.19 gal                69.0% (2005)                       $3.7011 gal

      $2.19 gal                81.5% (2006)                       $3.9749 gal

      $2.19 gal                83.9% (2007)                       $4.0274 gal

   Remember - - the prices in the righthand column represent the wholesale price for gasoline.  The standard rule of thumb is to add at least 60cts gal to that price and that exercise will yield a retail target. Hence, if the 2008 gasoline rally ran according to 21^st century form, we would be looking at pump prices of between $4.174-$4.7479 gal.

   I’ll reiterate that I do not believe that 2008 will match the templates suggested by other rallies in this decade. The average increase since 2000 has been approximately 78%.

   But thanks to the “big bottom”, even a half-baked rally puts record numbers in play.

A 39% increase would push wholesale prices above $3.04 gal, and push retail prices north of $3.50 gal.