How Close Is $4-Per-Gallon Gasoline?

It depends a lot on the time of year, as well as the way you do the math.

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Would the price of crude oil have to rocket up $40 more per barrel for us to see $4-per-gallon gasoline? If you use the back-of-the-envelope calculation that the government's chief energy forecaster employed Monday to gauge how much more pain at the pump is headed our way, it would indeed take nearly $140-per-barrel crude oil to add a dollar to the pump price. But we may not have to wait that long.

Guy Caruso, head of the Energy Information Administration, used a simple barrels-to-gallons conversion for his rough calculations. He divided each dollar by 42, because that's how many gallons are in a barrel. That means a 2.38-cent increase (which, for simplicity, he rounds up to 2.5 cents) in the price of a gallon at the service station for every $1-per-barrel jump in world crude.

That led to Caruso's painful prediction that the pump price probably will increase by 20 cents per gallon in the next two or three weeks even if there is no further change in crude oil, because we have seen only a 30 cent run-up at the pump since September on a $20 jump in the crude oil price. (Multiply 20 dollars by 2.5 cents and you see the full pass-through would be 50 cents.)

But that same $20 jump could cause a much more dramatic gas price hike if it happens as refineries are switching over to cleaner-burning blends for warm weather, summer driving season is getting underway, and the industry's stocks are low. In fact, the gas price hit an all-time record last spring just on those factors, with very little change in the price of crude.

"He was just doing a simplistic pass-through of crude oil costs, but crude oil prices are not the only thing that leads to the price at the pump," says Jonathan Cogan, spokesman for EIA. "There are inventories, demand, all of those things come into play. A crude oil price increase in the fall and winter is different than one in the spring and summer." That's something to keep in mind if you're longing for warmer weather.