April 5, 2006
Ken Alltucker
The Arizona Republic
Valley gasoline prices have surged 22 cents over the past month, and experts warn prices likely will head even higher.
But before grumbling about the prices, Valley residents can take solace in the fact that it costs less to fill a tank here than in other parts of the nation.
The Phoenix average for a gallon of regular unleaded gasoline was $2.55 on Tuesday, compared with $2.33 one month ago. That's 4 cents cheaper than the national average, $2.59, according to AAA Arizona figures.
"I didn't think we'd be this high, this soon," said David Cowley, a AAA Arizona spokesman who tracks gasoline prices. "So it's easy to say we'll get to $2.60 or $2.65 by summer." It could go even higher. Some pundits predict that gasoline could once again break the $3 per gallon barrier shattered last September after hurricanes battered Gulf Coast refineries.
AAA typically predicts summer travel expectations in the weeks before Memorial Day.
Gasoline prices typically rise as weather grows warmer, but experts predict that concerns about the supply of special summer gasoline blends could also send prices higher.
Nationwide, refiners are phasing out the gasoline additive MTBE, or methyl tertiary butyl ether, after failing to win congressional approval of a law that would have shielded them from lawsuits. Refiners are swapping MTBE with ethanol, a form of alcohol made mostly from corn, to bolster summer supplies and meet federal air requirements.
The switch doesn't directly affect retailers here during the summer. Ethanol already is used as a gasoline additive during the winter months because MTBE was phased out in 2005 over concerns that it contaminated groundwater.
The Valley's petroleum habit consumes about 110,000 barrels of gasoline per day, and ethanol accounts for 10 percent of that supply from November through March. It is not used during the summer.
"We really expect a lot of areas that have depended on MTBE to be hit harder than we are," Cowley said.
Yet in the wacky world of gas prices, energy traders cite anything that has the potential to affect the nation's gasoline supply as a reason to move prices. Ethanol industry representatives acknowledge tight supplies. The industry is expected to produce about 5 billion gallons this year, and every drop of it will be sold, shipped and used as fuel.
The ethanol industry is in the midst of a mini building boom to meet that demand. A total of 31 ethanol factories are under construction, and up to 25 of those are expected to be finished and operating by the end of the year, according to Sioux Falls, S.D.-based American Coalition for Ethanol.
Among those facilities is a $60 million factory planned south of Maricopa. Pinal Energy LLC estimates the plant pegged for an existing grain-distribution facility will churn out at least 50 million gallons.
Brian Jennings, an executive vice president of the American Coalition for Ethanol, said concerns about a shortage are overblown.
The oil industry is "being critical and accusing us of raising prices," said Jennings. "As a result of this so-called shortage, prices are going up for consumers."
Jennings said the oil industry warned of an ethanol shortage after California banned MTBE, sending gasoline temporarily prices higher. No such shortage ever materialized, and prices trickled back down.
"If they believed there wouldn't be enough ethanol, they wouldn't have switched to it at all," Jennings said.
Reach the reporter at ken.alltucker@arizonarepublic.com or (602)444-8285.
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