Gas prices rise before the New Year

Gas prices rose in Houston after declining to near the sub-$3 per gallon mark last week.

The average price of gasoline rose to $3.06, up 3 cents from the week before, according to AAA gas gauge. Texas saw prices also rise 4 cents to settle at $3.09, and the national average is up 4 cents to $3.25.

According to the travel agency, Texarkana has the most expensive gas prices in the state at $3.13, and El Paso has the lowest at $2.97. Texans are paying on average $43 for a 14-gallon fill up.

But even with those drops, Texans are still paying more than they did last year.

Texans paid $2.89 and Houston drivers paid $2.80 last year or 17 cents less than they are paying now.

Tom Kloza, chief oil analyst at Oil Price Information Service, said the price gap between last year and this year has slowly been closing after peaking earlier this summer.  During the summer, drivers were paying – at times – more than a $1 more than last year’s price.

“The narrowing in the gap has been driven by poor gasoline demand and mostly by a constriction in gasoline profits for refiners,” Kloza said. “These are very significant year-to-year declines.”

Don’t look to the New Year for cheaper gas prices.

Edward Morse, a New York-based head of commodities research at Citigroup Global Markets Inc., said gasoline prices may rise above $4 a gallon next summer as refineries along the East Coast shutdown.

As a result, there will be drought of fuel supply.

Sunoco Inc. and ConocoPhillips have idled two plants and plan to retire a third that together could process more than 700,000 barrels a day of oil. The retirements would drop refining capacity by 46 percent.

“We have a real supply problem ahead this summer because these refineries have not made money and they are shutting down,” Morse said. “Summer gasoline is harder to make than winter gasoline, and we could see $4 as a floor price rather than a ceiling limiting demand.”

Kloza, who monitors gasoline prices nationwide, said prices could rise to the $3.75- to $4.50-per-gallon range built on unseasonably high gasoline prices this year. While $4.50 per gallon is unlikely, Kloza said it is the most “apocalyptic view” of gasoline prices.

Gasoline at $4 per gallon “is a certainty for a number of states unless we have a financial collapse in Europe or a recession in the U.S.,” Kloza predicted.

The Energy Information Agency, which monitors gasoline prices, has a slightly better view of a gasoline prices in 2012, but it isn’t much better.

American drivers are projected to pay on average $3.45 for 2012, slightly down from the $3.53-per-gallon price for 2011, according to EIA. Crude oil prices are likely to stay in the $90 to $100-per-barrel range for 2012, the agency reported.

The Des Moines Register notes the high gasoline and crude oil prices come as the U.S. has jumped on the “drill, baby, drill” bandwagon.

Onshore drilling rigs have increased from 768 at the beginning of this year to more than 1,100 in early December. That represents a 24-year-drilling rig high, and as a result, crude oil production is rising and imports are dropping.

“This rising trend in production is driven by increased oil-directed drilling activity, particularly in on-shore shale formations,” the DOE said, in particular reference to the burgeoning Bakken Field in North Dakota, which has quadrupled production since 2006.

Earlier this week, Exxon Mobil said it expected U.S. oil imports to decline over the next three decades because of rising domestic supplies from shale plays in the U.S. and deep-water oilfields in the Gulf.

“We actually believe that oil imports have reached a peak in the United States and there will be a steady decline,” Bill Colton, Exxon Mobil’s vice president of corporate strategic planning, said during the presentation of the company’s annual energy forecast.