Turbulent times seen for gasoline prices

The spring driving season is likely to be one of the most turbulent and expensive in memory, with prices being tugged alternately upward and downward by politics in the Middle East and North Africa, U.S. economic news and the catastrophe in Japan.

Last week pump prices nationally and on Long Island stabilized -- the averages even slipped by a fraction of a cent -- but prices are at two-year highs -- locally almost 84 cents a gallon higher than a year ago. Regular averaged $3.783 Sunday, the AAA said.

Normally, prices are relatively low in winter and begin rising at this time of year as summer-grade gasoline, which is more expensive to produce, is phased in and improving weather increases driving. But this year has been anything but normal, and prices have been rising since September.

Tugging petroleum prices higher is some of the worst unrest in history in the Middle East and North Africa -- from a violent rebellion in Libya to street protests in Bahrain and several other nations. The conflict is complex -- pitting pro-democracy rebels against authoritarian rulers, Shia against Sunni Muslims, and Sunni-controlled oil giant Saudi Arabia against another giant, Shia- controlled Iran.

Oil flowing but prices rise

So far, the interruption in supplies from the region has been minimal. But, frustratingly for consumers, prices for oil and refined fuels often reflect what could happen, not what's actually happening.

"The worry is about Bahrain more than anything," longtime petroleum analyst Peter Beutel of Cameron Hanover Inc. in New Canaan, Conn., said last week. "It's right next to Saudi Arabia. And if you have a problem in Saudi Arabia, you really have a problem."

Said Kevin Beyer, president of the Long Island Gasoline Retailers Association, "It's going to be very unstable, I think, for the next couple of weeks." He believes futures prices for gasoline last week suggest higher pump prices for Long Islanders this week.

To cope, Americans are driving less; the U.S. Department of Energy said demand nationally fell by 3.9 percent last week from the week before -- despite an improving economy and more people back at work.

But the Energy Department forecast was made before the earthquake and tsunami in Japan, a still-evolving tragedy whose outcome -- and impact -- is far from known.

Japan using less gas -- now

For now, Japan is using less energy; people can't drive if they can't buy gasoline at stations with no electric power. In the longer term, experts see Japan using more energy to rebuild and to generate the electricity once produced by the wrecked Fukushima nuclear reactors. That increased demand suggests higher prices worldwide in the months ahead.

But there's another possible scenario; John Kilduff, a partner at Again Capital, an energy hedge fund in Suffern, says Japan's troubles could ripple economically around the world, especially to places like China, a major trading partner and energy user. That, he said, raises the specter of petroleum prices falling for the wrong reason: another recession.

"Japan was buying a lot of the cheaply manufactured stuff China makes -- like we do," said Kilduff. "If China gets impacted to any degree, they will definitely be a ratcheting down of energy demand for the fourth quarter and next year and we should really see prices decline. The good news is that we'll have lower gasoline prices. That bad news is that we'll be in a recession ourselves."