HEADINLINE: US gasoline prices STILL LAG behind eventual crude price

[Bluebear]

NEW YORK (Dow Jones)--Signs for gasoline stations tower over U.S. highways, but the prices on the boards are dwarfed by the prospect of surging crude oil trickling down to the pump.

While the gap between the pace of growth of gasoline and oil futures has vanished, U.S. retail gasoline prices still lag. Since the beginning of the year, benchmark oil and gasoline futures on the New York Mercantile Exchange have both increased by more than a third, but the average retail gasoline price in the U.S. has risen by only 22%.

So far, oil refiners and petroleum product distributors have absorbed much of the increase but their ability to continue to swallow losses and operate at razor-thin margins is limited. Many analysts consider $4-a-gallon retail gasoline across the U.S. a foregone conclusion this summer driving season, a period of typically peak demand, but those estimates only take current record-high oil prices into account. On Thursday, light, sweet crude futures breached $135 a barrel, more than double the price a year ago.

If oil hits $200 a barrel, the upper end of Goldman Sach's prediction for prices over the next six months to two years, the gasoline picture changes quite dramatically. At $200 a barrel, crude alone would cost $4.76 a gallon. Add in the costs of refining and distributing as well as taxes, and pump prices could rise well within the range of $6-7 a gallon, according to analyst estimates, a level that's unfathomable for most Americans. In some states, where gasoline tax is a percentage of the per-gallon cost, rather than a flat tax, prices could be even higher.

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"$4.00 a gallon gas? I hadn't hear that. That's interesting!" - President George W. Bush, February 2008

[Bluebear]

1. ("Headline")