But motorists may not see prices go much higher — or even stay that high throughout the entire summer — given the weak economy and the ability of refiners to kick up production, analysts add.
“Three dollars a gallon is probably a pretty rich price for the U.S. in 2010,” says Tom Kloza, analyst for the Oil Price Information Service.
The national average for a gallon of regular gasoline rose 0.6 cents Monday to $2.75 a gallon, up 81 cents from a year ago, says auto club AAA, Wright Express and the Oil Price Information Service.
Kloza expects $3-a-gallon gas in parts of the country within the next month. The Energy Information Administration, the forecasting arm of the Department of Energy, also predicts that pump prices may exceed $3 a gallon at times during the spring and summer.
Several factors may keep prices from rising much higher, including:
•Unemployment. The nation’s unemployment rate stood at 9.7% in February.
“People just aren’t driving to work like they were,” says Jim Ritterbusch, president of oil trading adviser firm Ritterbusch and Associates.
The number of vehicle miles traveled in the U.S. last year was about flat with 2008 but down 3% from the peak year of 2007, data from the Federal Highway Administration say.
Ritterbusch doesn’t expect much increased demand for gasoline until the unemployment rate falls below 8.7%. In the meantime, he expects gasoline to peak at $3 a gallon to $3.25 a gallon between now and the Fourth of July.
Then, he says, he expects weak demand to drive prices lower for the rest of the summer.
•Refining capacity. U.S. refineries are running about 14 million barrels a day of crude oil but have the capacity to run nearly 17.7 million a day.
The prospect of higher prices could encourage more production, which Kloza says could lead to greater supply and keep a lid on higher prices at the pump.
Other analysts see more pain at the pump. Over the last four years, gas prices have averaged a 35-cents-a-gallon increase between March 1 and mid-May, says Peter Beutel of energy research firm Cameron Hanover.
If that’s the case this year, some regions of the U.S. will see gas at $3.25 a gallon or more, Beutel says. That’s enough to cause trouble for an economy struggling for traction.
In parts of California, the average price of a gallon of regular gas is already over $3, the Energy Information Administration said on Monday.
“It does have a chance to nip part of the bud of any incipient recovery,” Beutel says.
A big wildcard in summer gas prices is the role investors will have on oil prices, Beutel says.
Prices are up about 15% in the past month on hopes of an economic recovery and the flow of money into oil. Investors, such as pension funds, are increasingly buying oil as an asset, Beutel says.
At times, he says, that’s driven up oil prices beyond what supply and demand would dictate.
SOURCE: http://www.usatoday.com/money/industries/energy/2010-03-08-gasoline-prices_N.htm
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