Gas to stay around $3 a gallon this summer, agency says

May 10, 2007|By MCCLATCHY-TRIBUNE

WASHINGTON -- Gasoline prices aren't expected to fall much below $3 a gallon throughout the summer, the Energy Information Administration warned yesterday.

Continued strong demand from motorists is outpacing gasoline supplies, said the EIA, the statistical arm of the Energy Department. High prices should spur more production and importation of gasoline, the agency said, but prices are unlikely to fall far below what AAA reported yesterday was a nationwide average of $3.03 a gallon.

Unleaded regular gasoline is expected to average more than $3 a gallon in May, but fall in June and July to about $2.90 a gallon, the EIA said.

"This projection assumes no significant unplanned refinery outages or crude oil production losses," the EIA cautioned in its weekly petroleum report.

The agency said prices could rise to more than $3 a gallon in August, during the normal end-of-summer surge in demand for gasoline.

If there's a bright spot in the gloomy price outlook, it's that the EIA discounted the potential for $4-a-gallon gasoline.

"Although many oil market analysts have talked about the potential for retail gasoline prices reaching $4 per gallon this summer, EIA does not expect the U.S. average price to get anywhere close to that level as long as the oil infrastructure remains largely unaffected this summer," the agency said.

It added, however, that 2007 "is certainly shaping up to be one in which consumers will likely see high gasoline prices throughout the summer months."

At least one independent analyst sees danger ahead.

"I don't think we have necessarily a crisis, but we are starting [the summer driving season] with very low stocks," said Antoine Halff, the head of energy research for FIMAT USA. "Given the low stocks, should something happen to a refinery, an unplanned outage, then we would have a thin safety cushion."

In its latest weekly retail price survey Sunday, the EIA said its $3.054-a-gallon result was only a 1.5 cents short of the nominal price record of $3.069 a gallon, reached Sept. 5, 2005, shortly after Hurricane Katrina ripped apart the Gulf Coast's energy infrastructure.

The EIA's all-time high inflation-adjusted price of $3.22 per gallon in March 1981 could be reached again if there is any hiccup in gasoline or oil production.

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