Gas could pass US$3.50 a gallon in weeks,
but could fall back later this summerThe Canadian Press 04/14/08
NEW YORK - Gas prices fluctuated over the weekend but appear poised to resume their seemingly relentless trek toward a record high milestone of an average US$3.50 a gallon. Forecasts call for U.S. gasoline prices to peak as high as $3.65 within a month.
Oil prices, meanwhile, rose to a record settlement and are within striking distance of last week's trading record of $112.21 a barrel as the dollar fell and crude supplies were disrupted in the U.S. and overseas.
At the pump, the average price of a gallon of gas in the United States edged lower overnight to $3.373 a gallon, 0.1 cent shy of a new record set Sunday, according to a survey of stations by AAA and the Oil Price Information Service. Still, prices are 0.8 cent higher than Friday, and almost 53 cents higher than a year ago.
The U.S. Energy Department recently predicted gas prices could average as much as $3.60 a month this summer, and said the daily national average could rise as high as $4 a times. Prices are already over $4 in some parts of the country.
But a growing number of analysts don't believe the national average will rise that high unless something unanticipated occurs.
"I don't think so, unless there is some sort of outage or refinery event," said Fred Rozell, retail pricing director at the Oil Price Information Service.
Indeed, barring such an event, prices could fall back to $3 a gallon, or lower, by late summer, said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill.
"Take your vacation late this year," said Ritterbusch, who believes prices will dip to those lows in July or August.
Still, unexpected refinery outages have forced pump price spikes in the past. Last spring, a string of unanticipated refinery outages caused gas prices to peak at record levels in May. Prices then mostly fell until late in the year, when they began to track crude oil higher.
Prices normally rise in the spring as suppliers stock up in advance of peak summer driving season, and as refiners switch over from making winter grade gasoline to the more expensive, but less polluting, summer version of the fuel. As they perform this switch, refiners try to sell off all of their winter grade fuel, driving overall supplies down.
This year, refiners are also facing short supplies of alkylate, a key ingredient in summer grade fuel. And gas prices are also following oil prices, which are near record levels. Light, sweet crude for May delivery rose $1.62 to settle at a record $111.76 a barrel Monday as the dollar weakened. Many investors regard commodities such as oil as a hedge against a weak dollar and inflation. Also, a weaker dollar makes oil cheaper to investors overseas.
Oil prices also rose on word of supply disruptions, including the weekend closure of a 1.2 million barrel a day Royal Dutch Shell PLC pipeline in the Midwest due to a leak. The pipeline has since reopened and is operating at reduced capacity. In Nigeria, Italian energy giant ENI said sabotage has cut crude production from one of its facilities by about 5,000 barrels a day.
Still, analysts believe the weak dollar is the main reason oil prices have risen to record levels this year, and have held above $100 for more than a month. Ritterbusch said prices could rise a few dollars higher than last week's record, but expects that moves by world governments to support the dollar will send oil prices lower later in the year.
The G7 industrialized countries raised concerns about the dollar's fall in a statement on Friday, a warning some analysts see as a sign the G7 may be contemplating an intervention that could lessen crude's attraction as an inflation hedge and send it lower.
"That should provide some relief at the pump," Ritterbusch said.
In other Nymex trading Monday, May gasoline futures rose 1.45 cents to settle at $2.8218 a gallon, and May heating oil futures rose 0.54 cent to settle at $3.2029 a gallon. May natural gas futures rose 15.2 cents to settle at $10.053 per 1,000 cubic feet.
In London, May Brent crude rose $1.09 to settle at $109.84 on the ICE Futures exchange.
Associated Press Writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.
