Americans face rare winter gasoline price spike

NEW YORK (Reuters) - The upcoming holiday season could bring some more unwelcome surprises for U.S. consumers as retail gasoline prices may top this summer's highs in catch-up with red-hot crude oil.

Gasoline prices usually ease in the winter as driving demand ebbs but industry experts now see an unusually strong retail market as the motor fuel tracks crude oil's 40-percent surge since mid-August to near $100 a barrel.

For some U.S. households like in the Northeast, a gasoline spike would compound the pain as they are also eyeing surging heating fuel costs this winter.

"It's a double whammy," said Sarah Emerson, director of petroleum at consultancy Energy Security Analysis Inc (ESAI).

"We don't see the heating oil price coming down before the end of winter. So with retail gasoline prices high, it is a double whammy because the crude oil rally supports both products," Emerson told Reuters.

For much of the recent spike in crude oil, the U.S. consumer has been shielded from the full effect as gasoline prices have been slower to rise, Credit Suisse analysts Mark Flannery and Nathali Tirado said in a report on Friday.

However, wholesale gasoline prices are now on the move, and over the next few weeks more of the rise in crude oil should feed through into end-user prices like gasoline.

Average U.S. retail gasoline prices stood at $3.08 per gallon Friday, up 11 percent from a month ago and 39 percent higher than a year ago, according to auto and travel group AAA's daily survey.

The experts see a possibility average retail prices would rise further to year end. Assuming crude oil prices hold around $95 per barrel, Credit Suisse said it estimates national average retail prices for regular gasoline would rise to roughly $3.20 per gallon by the end of the year, rivaling the all-time peak $3.23 hit last May.

"Summer (plus) gasoline pricing in the winter looks set to pick drivers' pockets ahead of the holidays," the Credit Suisse analysts noted.

"Consumers will need to make some uncomfortable income allocation decisions soon. While some may come from other areas of the economy, some will doubtless come from gasoline consumption itself," the report said.

ESAI's Sarah Emerson says the oil products price spike is mostly crude driven, not a result of industry fundamentals such as unusually lengthy refinery maintenance or rising demand.

"It's definitely a strong retail market for gasoline for this time of year," she said. "But it's not really about gasoline or anything in the industry, it's about crude rising."

Emerson says chances of crude oil hitting $100 are "quite high" adding: "I don't see crude collapsing anytime soon."

Citigroup Global Market said refining profit margins, hard hit in recent months by crude's surge as fuel suppliers were unable to pass along the extra costs, are likely to rebound.

"What remains is for gasoline prices to catch up - or crude to fall, or a combination," Citigroup added in a note.

The pain of surging products prices is felt in particular in regions like the Northeast, where most of an estimated 10 million U.S. households burn heating oil to warm their homes.

The U.S. Department of Energy says households in the Northeast will pay a record $3.06 per gallon for heating oil this winter, 66 cents more than last year. It will cost an average of $1,879 to heat a Northeast home for the season.

The wildcard is the possibility of a milder winter again this time around.

Pump prices at these lofty levels also suggest that gasoline and other motor fuels expenditure as a percentage of personal disposable income (PDI) may reach 3.5 to 3.7 percent before year-end, Credit Suisse said.

"This is a level only seen briefly during the summer months over the past three years, and represents another turn of the screw on the U.S. consumer who is now facing added pressures on PDI from the sub-prime situation," it noted.