How high can gasoline prices go?

IT SEEMS THAT WHENEVER the price of gasoline goes up, the oil industry has a new explanation.

Afew months ago, the explanation offered was that Ontario was experiencing a shortage of product as the result of fires at Imperial Oil refineries in Sarnia and Nanticoke and a strike by CNR conductors that was slowing deliveries from Western Canada.

That explanation didn't satisfy us, since it didn't deal with the fact that there was no similar shortage just across the U.S. border, and one would have thought a lot of gasoline could be brought in from New York and Michigan.

Of course, back then we were told everything would be back to normal in a few weeks once the two refineries were back at full production.

Well, the prices did slip a little, to the point where for awhile you could get regular-grade gas for slightly under $1 a litre, which was still at least 20 cents a litre above what the price was before the "shortage" developed.

But more recently the price has again shot up above the $1 mark, and by this week motorists were having to pay about $1.08 a litre for regular gas and nearly $1.20 for the top grades.

Now the explanation offered by the industry is that the North American wholesale price is soaring thanks to glitches at several U.S. refineries - several, that is of the few refineries left after the industry had neatly shut down enough of them to leave virtually no reserve capacity.

In the circumstances, it appears that a hurricane in the Gulf of Mexico similar to Katrina in 2005 will shut down enough refineries to produce yet another crisis and push gasoline prices through the roof.

Our suspicion is that the main reason Big Oil hasn't been building new refineries or enlarging existing ones is that they fear motorists will finally start buying fuel-efficient vehicles instead of gas-guzzling SUVs, with a resultant lowering of demand.

But thus far, the North American auto industry doesn't seem to share that expectation, with Japan remaining the major source of hybrids and other fuelefficient vehicles.