Further surge in gas prices expected

The replacement of choice for MTBE is corn-based ethanol. But ethanol is much more costly to transport because it has to be shipped by rail instead of via pipelines. It also takes about twice as much ethanol by volume to replace MTBE, according to the NPRA. Though Congress enacted generous subsidies last year to boost ethanol production, it's not clear that supplies will be adequate in some regions.

That could bring pump price spikes in those areas of the country — including parts of Texas, northern Virginia and the Northeast — that are most heavily effected the MTBE phase-out. (Other markets, like California New York, and parts of the Midwest, have already eliminated MTBE.) So while average prices are not expected to rise much above $3 a gallon, isolated markets could see higher spikes.

Some refiners are also shutting down production now to begin a round of seasonal maintenance that was deferred last fall after back-to-back hurricanes knocked a number of major refineries off line and put added pressure on the rest of the industry to run flat out. Some analysts are predicting that higher-than-normal refinery shutdowns could put a crimp in gasoline inventories in coming weeks.

Then there’s the uncertainty surrounding the price of crude oil — which is now approaching $70 a barrel. As the world economy remains strong, demand for oil is growing faster than producers can expand output.

NBC VIDEO Coping with soaring gas prices April 11: When gas prices soar, many people have to figure out ways to change their behavior and their lives in order to cope. NBC's Anne Thompson reports. Nightly News

OPEC producers are believed to be pumping about as fast as they can. Political instability in Nigeria and Iraq continue to hamper production and could bring even lower levels if attacks on oil facilities widen. And U.S. producers are still struggling to restore oil production damaged by last falls hurricanes. As of this week nearly a quarter of oil production in the Gulf of Mexico production is still shut in, according the U.S. Minerals Management Service. Since last August, some 144 million barrels of crude have been lost of hurricane damage, or about a quarter of the Gulf’s annual output.

Oil traders have already bid up crude prices because of uncertainty about the reliability of supplies. Any further crimp in production could send crude prices spiking and pump prices even higher.

With gasoline prices up sharply, refiners are enjoying their biggest profit margins in years — about $12 on every barrel they produce, according to Jacques Rousseau, an energy analyst with Friedman Billing and Ramsey in Houston. That means about 28.6 cents a gallon of the pump price represent refiner profit.

With all of the wild cards on the production side of the equation, a lot depends on whether consumers find ways to squeeze more miles of out of each gallon and cut back on trips to the pump. Gasoline consumption took a noticeably drop last fall after hurricanes Katrina and Rita sent prices higher, and sales of gas guzzling SUVs have been sharply lower since then. But demand picked up again this winter as pump prices fell.

“When you get north of $2.75 you start to see a demand response, which is to say demand is a little more temperate,” said Kloza. “People get pissed off.”

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