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NATIONAL REPORT – Gasoline prices may rise above $4 per gallon next summer, according to a report by Bloomberg Businessweek.
According to Edward Morse, the head of commodities research for Citigroup Global Markets Inc., the rise in fuel prices will be caused by a reduction in supply as refineries along the U.S. East Coast close.
Sunoco Inc. and ConocoPhillips have idled two plants and plan to shut a third that together can process more than 700,000 barrels a day of oil, or about 46 percent of the region's refining capacity, according to the report. That will increase the dependence on imports to meet fuel demand in the region that includes the delivery point for New York Mercantile Exchange futures contracts, the basis for national prices at the pump.
Energy Department data shows that cargoes arriving from abroad accounted for 19 percent of demand in the East Coast, or Padd 1 region, in September. Shipments from the Gulf Coast and Midwest met another 51 percent of consumption, with local refineries supplying the rest.
"We have a real supply problem ahead this summer because these refineries have not made money and they are shutting down," Morse said Friday in a Bloomberg TV interview with Tom Keene. "Summer gasoline is harder to make than winter gasoline, and we could see $4 as a floor price rather than a ceiling limiting demand."
Gasoline for January delivery on the Nymex rose 1.8 percent to settle at $2.6872 a gallon on the New York Mercantile Exchange, the highest settlement price since Nov. 8. Pump prices in the United States averaged $3.224 a gallon yesterday, 7 percent higher than a year earlier, according to AAA data.