Forecasts for the future note a gradual return to stability for industrial gas, which continues to recover from last year’s Gulf Coast hurricanes. Meanwhile, this year’s spring and summer seasons are not looking as flowery for the consumer gas market.

Forecasts say industrial gas prices are slowly returning to relative stability this year. Consumers, however, will continue to pay big bucks for gas for their autos.

Industrial
Like many chemicals markets, the industrial gas market still is recovering from last year’s hurricanes in the Gulf Coast. Industrial gas prices, particularly those for hydrogen, gradually are returning to more stable levels in early 2006 after spiking in the second half of last year, reports the Freedonia Group and Purchasing magazine.

The U.S. hydrogen supply was particularly hard hit last year, leaving a “hydrogen shortfall” in the North American market.

Long-term expectations are for prices and supplies to hold steady, as suppliers bring more facilities currently under construction online this year. Freedonia says any industrial gas shortages in the U.S. in the next five years likely would be temporary and due to natural disasters.

According to Purchasing, “demand for industrial gases in the U.S. will grow at an annual rate of 3.2 percent to approximately 80 billion cubic meters in 2009, bringing the market value to approximately $7.5 billion.” Increased growth in electronics and healthcare are tapped as primary drivers of the anticipated advance, while metals and chemicals are expected to continue pushing demand and capacity plans.

Developing green applications for industrial gases are expected to show the greatest growth first, due in part to environmental regulations. Metals production and fabricating will continue to be the largest market for industrial gases, accounting for 31 percent of total demand in value terms in 2009.

Consumption of industrial gases in chemical processing and petroleum refining markets, the second largest outlet for gases, will increase 5.4 percent per year to more than $5 billion in 2009. Freedonia says gains will result from the increasing use of oxygen and nitrogen in chemical processing applications (primarily to improve the environmental performance of chemical operations); and the growing use of hydrogen in petroleum refining operations (in response to higher demand for lower sulfur motor fuels).

“Over the next year or so, I don’t expect any significant supply problems,” says Freedonia analyst Bill Baumgartner. “That will keep prices from rising too much.”

Consumer
There’s nothing unusual about gasoline prices rising at this time of year: the season usually brings pain at the pump. In fact, gas prices have risen between March and May in 21 out of the past 22 years.

Notes BusinessWeek:

Like bears coming out of their winter retreats, refiners must stretch this time every year, replacing winter’s fuel formulation with newer, more environmentally friendly summer blends. During that transition, prices traditionally spike.

Yet this year is already looking worse than usual, as the price for a gallon of regular unleaded gasoline is already way above the federal Energy Information Administration’s (EIA) forecast last summer average of $2.62, and has topped $3 at service stations in many cities. Indeed, U.S. gasoline supplies will be tight this summer, according to U.S. Energy Secretary Sam Bodman last Friday.

Reported last week, the U.S. retail price for gasoline shot up 10 cents over the previous week to an average $2.78 a gallon, the highest level since early October, and is expected to keep climbing, the government said little more than a week ago. The national average price for regular unleaded gasoline has soared 29 cents a gallon in the last three weeks and is up 55 cents from a year ago, based on the federal EIA’s weekly survey of service stations.

Factor in a tense global oil market, and this year is looking grim for drivers.

The EIA forecast’s “silver lining” — and you really have to stretch the traditional meaning of “silver lining” here — is that, after motor fuel prices peak in May, the national average will not reach the all-time high of $3.07 a gallon hit last September after Hurricane Katrina disrupted petroleum supplies.

References

Prices, supply getting more stable
by Wayne Forrest
Purchasing magazine, April 6, 2006

Spring Fever at the Pump
by Christopher Palmeri
BusinessWeek, April 18, 2006

Gasoline Prices Jump Another Dime
Reuters, April 17, 2006

Additional

Energy and Raw Materials Prices Still Heading Higher
Procurement Central, April 19, 2006