Consumer News: What $150 oil could mean for gasoline and diesel prices

Beyond inflation, the economic impact is uncertain

By Mark Huffman of ConsumerAffairs

• Bank of America says Brent crude could rise above $150 a barrel if oil supplies tighten further. That is a risk scenario, not the banks main forecast.

• If crude climbed from roughly $100 to $150 and the full increase reached the pump, it would add about $1.19 per gallon to gasoline and diesel.

• Diesel could face additional pressure because supplies of the fuel are already tight, raising costs for trucking and deliveries.

Bank of America is warning that crude oil could climb above $150 a barrel if supply disruptions worsen. The banks year-end forecast for Brent crude is $95 a barrel, making $150 a potential outcome under more severe conditions rather than its expected price.

For drivers, the difference could be substantial. A barrel contains 42 gallons, so a $50 increase in crude works out to about $1.19 per gallon before changes in refining costs, distribution and taxes. If that entire increase reached consumers, the national average for regular gasoline could approach $5.67 a gallon, compared with $4.48 in the latest U.S. Energy Information Administration weekly survey. A 15-gallon fill-up would cost about $18 more.

That calculation is an illustration, not a pump-price forecast. Retail prices do not move in perfect step with crude. They also depend on how much gasoline refineries produce, local supplies and the costs of getting fuel to stations.

Diesel could prove especially costly

The greater threat comes from the impact of diesel, the fuel that moves food and merchandise through the economy. The same crude-price calculation would put diesel near $7.72 a gallon, up from the EIAs latest national average of $6.53. A truck buying 100 gallons would pay roughly $119 more for that fill-up.

Diesel could rise by more or less than that estimate. The EIA says refining margins for diesel and other distillate fuels have been particularly high, reflecting disrupted refinery output and tight supplies. Those pressures can push diesel prices up even when crude prices hold steady.

Higher diesel costs reach beyond people who drive diesel vehicles. Trucks, farm equipment and construction machinery use the fuel, so a sustained increase can raise the cost of moving food and other goods. Businesses may eventually pass some of those costs to customers.

The key question is whether a jump in crude would last. A brief spike might have a smaller effect at the pump; a prolonged disruption would give higher oil costs more time to work through gasoline and diesel prices.