WASHINGTON -- U.S. gasoline prices hit a record on Tuesday and are expected to keep climbing into summer, said Reuters, citing motorist and travel group AAA. Average regular gasoline prices touched an all-time high of $3.227 per gallon, up 27 cents in a month and surpassing the previous peak hit in May 2007, AAA said in its daily survey of more than 85,000 self-serve gas stations. The group said it expected pump prices to rise further in the coming months, breaking above $4 a gallon in some areas by summer, when road travel typically peaks.
The rise in pump prices comes as crude oil rises [image-nocss] to new peaks near $110 per barrel amid an increase in speculative investing in commodities and concerns that world energy consumption will outpace new supply.
Most respondents (more than 54% of close to 200 votes) to yesterday's Kraft/CSP Daily News Poll, "With crude oil topping $109 recently, how high do you think oil prices will go in 2008?", said oil prices will top off at $120 per barrel. More than 21% said $150, nearly 17% said they have already peaked, more than 3% said $200, nearly 3% said $180 and almost 2% said more than $200.
And U.S. gasoline demand will likely fall this year, reported Dow Jones. "Gasoline demand could stay flat, but will most likely go down," said Bill Klesse, CEO of Valero Energy Corp., speaking at an industry convention.
A combination of the weak dollar, increasing investment in commodities and instability in the housing market have driven oil prices up, while depressing consumers' incomes, he said. The conditions will likely result in a reduction in gasoline demand, he said.
On Tuesday, the U.S. Energy Information Administration (EIA) revised its 2008 projection for gasoline prices to average $3.21 a gallon, up from the $3.07 previously forecast. EIA also pointed to a "significant possibility" of $4 gasoline in some regions of the country or at some point during the year. The agency trimmed its projections for 2008 U.S. gasoline consumption, but still sees growth of about 0.3% compared with 2007.
While Klesse did not specify how much demand could slip, he said the industry would likely feel pressure from many external forces, including the commodities market, in which oil prices have hit a record high.
But earlier this week, Trilby Lundberg of the Lundberg Survey, which surveys approximately 7,000 U.S. gas stations, said that "even if crude oil prices drop slightly in coming weeks, U.S. retail gasoline prices have nowhere to go but up."
"Assuming no huge change in crude, another 20 to 30 cents at the pump is just around the corner," she said in her biweekly analysis provided to CSP Daily News. "Refining margin alone, depressed since late last Spring, is enough to do that. Daylight Saving Time has launched Spring demand growth that will use up the present gasoline surplus. Add the additional ethanol required this year by federal government order, with its currently rising prices and its mileage penalty effectively adding to gasoline demand, and Spring 2008 can be expected to grab everyone's negative attention. Everyone's attention, that is, except OPEC's and some of the world's under-producers, who are happy enough riding the price wave, and U.S. federal energy policy makers, who are happy claiming that the mandated renewable fuels program is part of the consumer fuel price solution."
The White House, meanwhile, said that soaring oil prices are "not going to be solved overnight" and that "it would be wrong" of President Bush to promise otherwise. The Associated Press said that presidential spokesperson Dana Perino said Tuesday on Air Force One that "there are some things we cannot do." She said that the White House is concerned about the impact on consumers and small businesses. But she said, "It would be wrong of the president to provide false hope to people to think that we are going to be able to have an immediate impact to reduce gas prices. This is something that we're all going to have to work through."
President Bush has urged the Organization of Petroleum Exporting Countries (OPEC) to boost crude oil production to ease record energy prices and help avert an economic slowdown, but the group has shrugged off calls for more supply.
AAA president and CEO Robert L. Darbelnet called on the presidential candidates to "each take this opportunity to clearly articulate long-term, comprehensive energy strategies so voters can understand how they would address this key issue."Click hereto read EIA's This Week in Petroleum.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.