June 12, 2008 in Business

Agency sees gas prices leveling

Associated Press The Spokesman-Review
 

Fuel forecast

Gas prices are likely to remain close to or above $4 for the rest of the year and average $3.92 a gallon through 2009, according to the Energy Department.

WASHINGTON – Gasoline prices should peak at $4.15 a gallon this summer, the government says – finally an encouraging word for motorists who might be thinking the cost of a fill-up will just keep climbing.

But wait: The predicted relief is pretty modest. Prices at the pump are likely to stay above $4 a gallon most of next year, according to Wednesday’s projections by the Energy Department’s statistical agency.

Oh, and the government tends to err on the optimistic side.

Guy Caruso, head of the federal Energy Information Administration, delivered the sober news at a congressional hearing on energy prices and the future of oil.

Even as he spoke, oil prices jumped again, edging for a time above $138 a barrel and putting yet more upward pressure on gasoline prices.

A drop in gasoline inventories, concerns about hurricanes that could disrupt Gulf of Mexico supplies, and most important the high oil prices all have contributed to a belief that the upward spiral of gasoline costs will continue at least for a few months, according to Caruso as well as private energy experts.

Motorists are paying $4.05 a gallon on average nationwide, and considerably more in some parts of the country, according to a survey of gas stations by AAA and the Oil Price Information Service. That’s an increase of nearly $1 a gallon since January.

And little relief is in sight.

Prices are likely to remain close to or above $4 for the rest of the year and average $3.92 a gallon through 2009, the Energy Department agency forecast.

Crude oil prices are expected to average $126 a barrel in 2009, or $4 a barrel higher than this year, as oil supplies and demand will remain tight, Caruso told the House Select Committee on Energy Independence and Global Warming.

“The consensus view,” said Rep. Edward Markey, D-Mass., the committee’s chairman, “is that oil above $100 a barrel is going to be with us for some time.”

The Energy Department’s statistical agency projects oil prices declining to $86 a barrel in 2010 but then increasing to $107 by 2015. Markey said he doubted those numbers and noted that EIA projections in the past have been overly optimistic when it comes to energy prices.

A panel of energy experts told the House hearing that people shouldn’t expect any quick fixes to the country’s energy problems.

They said one answer is more conservation and a shift to alternative fuels – transitions that would take time.


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