Gasoline Prices May Have Peaked, Agency Report Says

With a little luck, gasoline prices have peaked, the government said Thursday, despite higher summer demand ahead.

Americans still will be paying record summer prices and could face local shortages, the Energy Information Administration said in its monthly energy outlook report. If something goes wrong--a problem at a refinery or a pipeline--gasoline prices in those local markets will soar because gasoline inventories are extremely low, said the EIA, an independent analytical agency within the U.S. Energy Department.

California’s gas market is particularly vulnerable to disruptions, and motorists here can figure on paying more than the rest of the nation because of the unique, cleaner-burning gasoline required in the state.

The EIA’s report, though hardly rosy, is considerably more upbeat than last month’s prediction that summer gasoline prices could top $1.80 a gallon nationwide and even more in California. The new forecast is a response to last week’s decision by the Organization of Petroleum Exporting Countries to increase petroleum production, which has caused oil and gasoline prices to fall.

“We do see some relief for the consumer,” said Jay Hakes, the information agency’s administrator.

Still, the average U.S. household, which typically logs about 12,000 miles from April through September, will pay $160 to $170 more in gasoline costs than they did in those same months last year.

The EIA is forecasting the nationwide price of self-serve regular gasoline will average $1.46 a gallon this summer, up 25% from the $1.17 a gallon U.S. motorists paid last summer. The U.S. average price of self-serve regular probably has peaked this month at $1.52 a gallon and gradually should decline to $1.39 a gallon in September, the agency said.

The April average of $1.52 a gallon is a record in current dollars, but after adjusting for inflation is 40% below the peak of March 1981. If adjusted further to reflect fuel efficiency improvements in cars and trucks, current fuel costs are about 60% less than in March 1981, the EIA said.

Although the EIA did not predict California prices, the agency noted that the state’s market tends to be volatile and the gasoline more expensive because of clean-air mandates and high taxes.

California refinery production already is at a pace near the levels seen in summer, and gasoline inventories are close to the low end of normal, said Rob Schlichting, spokesman for the California Energy Commission.

“Things look pretty good,” he said.

California motorists are paying an average of about $1.77 a gallon for self-serve regular gasoline, which has declined slightly more than 2 cents a gallon in the last two weeks. The U.S. average of about $1.50 a gallon is down 2.6 cents in the last two weeks.

Those were the first price decreases since mid-January. A year ago, U.S. motorists were paying 39 cents a gallon less and Californians were paying 18.5 cents a gallon less.

Gasoline demand this summer is projected to average 8.72 million barrels per day, up 1.5% from last summer. Although that is a record, the EIA said, this year’s growth is well below the 2% average increase of recent years.

Assuming no major problems at U.S. refineries, higher world oil production this summer should be enough to keep gas prices on the decline, the EIA said. But because many parts of the United States are shifting to a cleaner gasoline mandated by the Environmental Protection Agency, localized shortages could result because of low inventories, the EIA said.

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Reuters was used in compiling this report.