Rising Gas Prices

Houston gas prices are hovering around $3 per gallon, and prices could go higher than that in the coming weeks. Houston Public Radio's Laurie Johnson reports on the volitility of the oil and gas market.

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People filling up at the pump over the weekend may have noticed two spikes in gas prices. Regular unleaded is running around $2.91 per gallon compared to $2.09 this time last year. Bob Tippee is the editor of Oil and Gas Journal.

"The whole gasoline market is unusual at the moment. We just have a lot of extraordinary stresses in the market, including refineries still down from the hurricanes, the transition from one oxygen-adding additive to another which is causing some logistical problems and then continued elevated prices for crude oil."

Crude oil prices topped $75 a barrel last week, setting a record high. Prices fell back below the $75 mark, but summer is approaching which means more gasoline demand, less supply and higher prices. Tippee says there is a slowdown in consumption and refineries affected by last year's hurricanes are slowly coming back into production.

"We are getting some more supply coming into the system. Until -- until that -- you know -- new supply reaches significant levels the price could continue to rise. But once the supply gets here, if everything else stays the same we should see some relief."

But for the next few months at least, Houston could see higher gas prices as demand increases over the summer and the industry scrambles to keep up with production of ethanol. Last year, Congress mandated the use of ethanol in gasoline to increase oxygen levels and produce cleaner burning fuel. Demand for ethanol currently surpasses supply and the East Coast and Texas are feeling the squeeze.

"We don't know the extent of the problem, how quickly it'll take to get blending facilities and transportation facilities in place. We don't know the extent to which there really will be a supply squeeze and we in Houston will be one of the areas that will experience that because we are a reformulated gasoline market that used to use reformulated gasoline with MTBE in it, so we're going to have to get ethanol from the Midwest."

Tippee says this is new territory and there's no way to predict what will happen to Houston gas prices over the next few months. But prices at the pump are likely to remain higher than in past years. Laurie Johnson Houston Public Radio News.

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