Despite some stalling of economic momentum, weaker data at home and overseas, and a big building of oil inventories, gasoline prices remain irritatingly high -- down 8.6% from their high earlier this month but still up nearly 30% from November's lows. That continues to weigh on consumers, pulling down real wages in three of the last four months and forcing folks to tap into savings to maintain their spending.

Obviously, that's not good. Nor is it sustainable. Something's got to give. Either wages accelerate (unlikely), gas supplies jump (also unlikely due to refinery closures) or the economy stagnates, pulling down energy demand (very likely).

This is the scenario the analysts at Bank of America Merrill Lynch are looking for. But first, upside risks remain as gas reserves are low. That sets the stage for a potential summertime surge before prices cool. Here's why.

The problem is manifold:

*The combination of refinery closures and outages has sharply cut the supply of gas in the Atlantic Basin over the last few weeks.

*Demand for fuels remained high due to sustained strength from the emerging market economies and an early first-quarter boost in U.S. economic activity.

*U.S. gas imports sluggish due to European refinery bottlenecks. Statoil said it could close its 200k barrel-per-day Mongstad refinery due to overcapacity.

And now, new problems are coming into focus:

*Inventories are low and the switch to summer fuel formulations means that tightness in the Atlantic Basin market isn't going to ease.

*European supply continues to flow towards Asia.

The wild cards are any unplanned refinery outages, tensions in the Persian Gulf (from Iran or Bahrain), or a surprise announcement of additional monetary policy easing out of the Federal Reserve at its meeting next week. An announcement from the Fed, if it happened, weaken the dollar, boost crude prices, and send gas prices moving higher once more.

Another catalyst to watch is the rebound in U.S. gas demand as travelers rev up for the summer driving season. The team at Merrill Lynch doesn't think this can last, since "demand will likely have to continue to adjust lower, helped by high prices."

By mid-summer, the situation should ease. Demand should drop off again. European refineries will be coming out of maintenance periods. Three of Petroplus' facilities will start up again, including Antwerp and Petit Couronne. And the recent tightness has boosted refining margins, encouraging producers to increase output.

Long story short: Higher gas prices aren't going anywhere anytime soon.

For investors, the energy sector has been an attractive source of short profits since late February as the sector tripped down into a period of underperformance against the overall market. Since then, the Energy SPDR (XLE) has lost more than 9% while the S&P 500 has remained flat.

With demand rebounding a little and refinery margins up, I want to cover my energy shorts in the Edge Letter Sample Portfolio. I am covering Basic Energy Services (BAS) for a 23% gain since late March, ConocoPhilips (COP) for a 3.3% gain, PennWest Energy (PWE) for a 16.5% gain, and selling the Direxion 3x Energy Bear (ERY) for a 14.6% gain.

New opportunities are popping up in the financial sector, the subject of my last post.

Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at anthony@edgeletter.c​​om and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.