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MoneyTuesday, April 8, 2008 2:12 PM CDT
Government: Gas prices could peak at $4 gallon this summer
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NEW YORK -- Retail gas prices could climb as high as $4 a gallon this summer, but prices at such lofty levels will make many Americans think twice about hitting the road this summer, the Energy Department said Tuesday. | Interactive: Gas prices across U.S.

High prices and a weak economy are expected to cut demand for gasoline by about 0.4 percent during the peak summer driving season, the department’s Energy Information Administration said in a monthly report on petroleum supplies and demand. Overall consumption of petroleum products will drop by 90,000 barrels a day this year. Previously, the EIA had projected petroleum consumption would rise by 40,000 barrels a day.

Average monthly gas prices will peak around $3.60 a gallon in June, the EIA said. However, prices could rise much higher than that at times.

“It is important to note ... that even if the national average monthly gasoline price peaks around $3.60 per gallon this summer, it is possible that prices at some point will cross the $4 per gallon threshold,” the EIA said.

The government had previously estimated that average monthly prices would peak near $3.50 a gallon. Many analysts predict prices will peak close to $4 a gallon.

On Tuesday, gas prices slipped slightly to a national average of $3.331 a gallon from Monday’s record of $3.339, according to AAA and the Oil Price Information Service. Prices are 55 cents higher than a year ago.

Diesel prices, which are already averaging more than $4 a gallon nationwide, will average $3.62 a gallon this year, up 74 cents from 2007, the EIA said. Diesel fuel is used to transport the vast majority of the world’s food, consumer and industrial products. High diesel prices are one of the reasons food prices are soaring.

Crude oil prices are the biggest reason gas and diesel prices are rising, the EIA said. Oil is now expected to average $101 a barrel this year, up from the EIA’s previous projection of $94. Next year, the EIA expects oil to average $92.50 a barrel, up from a previous projection of $86.

On Tuesday, light, sweet crude for May delivery fell 13 cents to $108.96 a barrel on the New York Mercantile Exchange. But prices fluctuated as investors kept an eye on the dollar and on Iran, which announced plans to expand its uranium enrichment program. Prices rose to a trading record of $111.80 a barrel last month.

While high prices are damping demand in the U.S., petroleum consumption remains strong in China, India, Russia and the Middle East, the EIA said.

“The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices,” the EIA report said. “The flow of investment money into commodities has contributed to crude oil price volatility.”

Indeed, the EIA acknowledged “significant uncertainty” in its oil price projections, noting that unexpected supply disruptions due to conflict in oil-producing nations, unusual weather or refinery outages could send prices spiraling sharply higher.

“Prices can fall as rapidly under a different set of circumstances, such as easing of geopolitical tensions or further weakening of U.S. and world economic growth,” the EIA’s report said.

The EIA report underscored the difficulties refiners are facing, despite high gas prices. Refiners have to buy the crude they process into fuel. But falling demand for gasoline prevents refiners from raising gas prices enough to keep up with the soaring price of crude.

“These projections indicate a narrowing of the difference between the gasoline retail price and the average cost of crude oil,” EIA said.

The EIA also projected that OPEC oil production will average 32.3 million barrels a day this year, up about 100,000 barrels a day from previous forecasts.

Take a look
The landmark Space Needle is seen within view of a sign displaying gas prices at a ConocoPhillips gas station March 11 in Seattle. (AP Photo/Elaine Thompson, File)
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Reader comments on this story - 15 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

zorro wrote on Apr 9, 2008 5:59 AM:

" This is OLD NEWS! We are ALL the problem. It's all about consumption and our "Semper Fi" attitude. $4 gallon.....That will be a bargain this summer! Local, state, and fed gov are reaping huge tax revenues. Why should anything change? "

jason_06_01 wrote on Apr 8, 2008 11:32 PM:

" John D, you make a great point! It's true boats do generaly have poor fuel economy. Usually worse when the boat is idling on the water, gets a better while on plane, but not much. Then, when the throttle is down you might as well just be pouring gasoline in the water. but I'll tell you I am proud to own a boat even though it's expensive to maintain and to operate. Ever since I was a child though my parents owned a boat and I'll tell you what they really bring a family together. It brought me closer to my father. I learned how to kneeboard, waterski, and slalom ski. "

johnd wrote on Apr 8, 2008 10:45 PM:

" jason You missed my point a boat is another gas waster. "

jason_06_01 wrote on Apr 8, 2008 9:47 PM:

" I understand the need for more fuel efficient vehicles, but John until you pull a boat, or some type a trailer you will never understand the importance of having a good work horse with these features. "

johnd wrote on Apr 8, 2008 5:58 PM:

" Plenty of vehicals that get 30mpg or better.But so many drive SUV'S or Pickup trucks and they think they have to have 4wheel drive and a trailer package to pull there boat to the lake so they can burn more gas.When this is mentioned I here its my money I will drive what I want and pay for the gas.Yet 9 times out of 10 there the ones who gripe about gas prices. "

Rocket Man wrote on Apr 8, 2008 4:18 PM:

" Who is to blame? Take a look in your driveway. If your car/truck gets less than 25 mpg, stand up and accept that you are the problem, not 'Big Oil'. It's the demand not the supply. End of story . . . "

el sid wrote on Apr 8, 2008 2:55 PM:

" Most of you do not remember the early 50's, but we had 8000 pound cadillacs
that got 21 miles to gallon,, gas was 24 cents a gallon. Fifty years later we are still only averaging 21 mpg at $3.35 a gal. Why no improvement. Ask the oil company's!!!!. They will buy up any technology that will use less of their product, and lock it up. This came right from the horses mouth, of a friend of mine that worked the oil companies in a management position.Their profits would decrease greatly if we produced a mode of transportatiion using other than petroleum products. If we were to begin using our reserves and decrease our using foreign oil, watch OPEC start screaming,and lower their prices. Do you also know the US
exports oil to other country's. How stupid are we.
"

The Original JD wrote on Apr 8, 2008 1:42 PM:

" Government has little control over the gas prices outside of either allowing the drilling for oil on land currently forbidden, or opening up the strategic reserves which unless oil prices reduced quickly would not lower the prices. Oil prices are controlled by supply and demand, and the demand has been constantly increasing. The only way to reduce the price is to reduce consumption. Only a fool would fall for any politicial rhetoric about dropping gas prices. It is something they can not control. "

N595 wrote on Apr 8, 2008 1:41 PM:

" I agree that Big Oil is a fat cat these days. I have a friend who is a Project Manager at a big Oil Company with offices in Naperville and she took home a $25k bonus last year on top of her good six digit salary. However, if we want vehicles, we will need oil. Petrolium based products are more than just fuel. Think about all the plastics and lubricants that go into a car. Even to vehicles that run on clean energy products still need crude by-products. Maybe the question should be why is the US the biggest consumer of Crude Oil. I see people saying we need vehicles that run on clean fuel, but just like true democrates they are just finding ways to "patch" the problem and not fix it. How do we correct the infastructure in the United States so that reduce our demand? In a county such a McLean, I don't see people promoting ride-sharring, or public transportation (besides State Farm). "

Meh wrote on Apr 8, 2008 1:10 PM:

" Totally agree, Political Heretic. Its time for a vision of a largely oil-free economy.

Of course, this is blasphemy to the BN Republican types that frequent this paper. Check out the Republican solution from 61898444409... whine about the Democrats and then more oil! Proves my point. "

isunormalil wrote on Apr 8, 2008 1:10 PM:

" 6189844409...did you attend a high school? First of all the democrats can't do anything without 2/3 majority of the senate to pass a bill. President Bush and his Rich oil buddies would veto any bill passed outside the 2/3 majority. Second, Oil executives made over 100 billion dollar profits last year...quit making excuses. "

landlord wrote on Apr 8, 2008 1:05 PM:

" Time for people to demand a hiatus on state/federal taxes on gas! Hasn't this been done once before? "

clarkbar wrote on Apr 8, 2008 12:50 PM:

" I whole heartedly agree with previous two posts. If we can put a man on the moon, our scientists and engineers can come up with an alternative to powering our cars and trucks down the road. What prevents them, GREED! We are all suffering because of the big jump in prices. Who cares, not our elected politicians or businesses making huge profits. And, countries that hate us are profitting as well. The american everyday joe is aiding terrorist countries, even if they don't want to. "

6189844409 wrote on Apr 8, 2008 12:32 PM:

" First I thought the Dems were going to lower the prices when they took control of Congress Second most of the taxes on gasoline goes to the government. The oil companies make very little on a gal of gasoline. Third we need more refineries and we need to drilll where we have oil. It is a huge area and no one will suffer because of it, not one moose or polar bear. "

Political Heretic wrote on Apr 8, 2008 12:11 PM:

" Yes! Face it, folks, it's time to put as much effort into creating clean, renewable energy as this country once put into the moon mission. The Democrats want to take away the oil company's tax breaks and use that money for this end, and I agree. Of course, the Republicans are owned by the oil companies, so it won't happened until we get a fully Democratic federal government. Here's to hoping exactly that happens. "

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