Posted: January 4, 2008

The price oil refiners have to pay for the crude they refine into gasoline and other products is rapidly rising and will significantly add to consumers’ price pain in 2008, according to Milton Copulos, an energy economist who frequently testifies before the U.S. Congress on energy security issues.

Until recently, refiners were partially protected from the rapid rise in crude prices by long-term contracts. But as more and more of these four-to-five-year-long contracts expire, refiners’ acquisition costs are steadily rising – from the $50s a year ago to around $75 a today, with the likelihood of climbing into the $90s in 2008, Copulos told EnergyTechStocks.com.

Refiners will respond by raising prices even higher than is currently forecast by the U.S. government’s Energy Information Administration (EIA), Copulos believes. While EIA is looking for a $3.40 national average on a gallon of regular by spring 2008, Copulos is looking for $4, with a high-priced state like California up around $4.50 a gallon.

If Copulos is right, the impact on the U.S. economy could be extreme, especially on food that must be transported to market by truck. Oil-dependent industries such as plastics and chemicals could also take an unexpected hit.

Still, there should be winners, according to Copulos, especially companies exploiting the Canadian tar sands region of Alberta. “We’re going to be looking for a lot more oil from Canada,” Copulos said.

Another potential winner: biofuel, as the price for a gallon of ethanol begins looking more and more attractive against a gallon of regular gas.