Gas prices forecast to spike in spring

Shortage of key gas additive alkylate will boost gas prices

By Maria Varmazis -- Purchasing, 1/31/2008 9:31:00 AM

The shortage of a key additive in gasoline, alkylate, is expected to increase gasoline prices to as high as $4/gallon by spring. The Associate Press reports today that as producers switch to summer-blend gas, the alkylate additive will be in high demand, but there isn't enough of it to satiate demand. As a result, gas prices could hit between $3.50/gallon and $4 by the spring.

Alkylate is a newer alternative to the fuel additive MTBE, which has been phased out of use in gas blending because of its link to cancer. Fuel additive shortages have caused price issues before—in early and mid-2006, when ethanol prices rose from sudden demand hikes to use the chemical as an MBTE substitute.

Earlier this month, Purchsaing.com reported that CIBC World Markets forecast that retail gasoline prices in the U.S. could go to $4.50/gallon in four years as crude oil supply to the U.S. tightens.