State may see $4 gasoline in ’08

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Los Angeles Times Staff Writer

Gasoline could average $3.75 a gallon across the U.S. in a few months, pushing the price in California up and over the $4 mark, energy analysts said Wednesday.

Several factors point toward a nightmarish spring for motorists, they said, including persistently strong crude oil costs and the fact that the traditional December drop in pump prices didn’t materialize.

“If anyone expects gas to be less than a new record, they are not thinking,” said Fadel Gheit, senior energy analyst for Oppenheimer & Co. “There is no question it will be much higher than last year.”


Americans will start 2008 paying about 65 cents more a gallon than they did in January 2007, according to the forecasts, and by April could see self-serve regular selling for $3.50 to $3.75 a gallon.

In California -- where gas this year has fetched as much as 50 cents more than the national average -- $4 a gallon “will no longer be considered a rogue number,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “It will list for that much in a lot of places.”

The Energy Department’s weekly survey of service stations Monday found the average pump price was $2.980 nationally and $3.261 in California, a couple of pennies lower than a week earlier -- but much higher than the same period last year, when the number was $2.341 across the U.S. and $2.607 across the state.

“It’s unprecedented having prices this high at the end of the year,” said Marie Montgomery, a spokeswoman for the Automobile Club of Southern California.

Pump prices usually fall between Labor Day and the end of the year, in recent years dropping about 17% in California.

This year they did the reverse, gaining 17%.

Demand was one reason. MasterCard’s weekly SpendingPulse report said the four-week average for gasoline purchases was 0.5% higher than a year earlier, boosted by shopping and vacation trips. Kloza of the Oil Price Information Service said Americans would burn about 2.5 million more gallons of gasoline this week than they did during the same week in 2006.


But the main culprit for high gas prices was the cost of crude oil, which on the futures market closed at $95.97 a barrel Wednesday in New York.

The benchmark grade of U.S. crude averaged $72 a barrel this year, the Energy Department said, up from $60.23 last year, $50.23 in 2005 and $36.98 in 2004.

Next year, the agency said in its short-term energy outlook, the average could be $85.

Both gasoline and diesel prices “are projected to average well over $3 per gallon in 2008, with gasoline prices peaking at over $3.40 per gallon next spring,” the outlook said.

Gas costs more in California than nationally because the state requires a special blend to meet stiff air-quality standards and because the formula switches to a more costly summer blend before much of the rest of the nation.

Motorists found the New Year predictions infuriating.

“It’s absurd, ridiculous,” said Eric Mills, 40, a special-event coordinator for the entertainment industry, as he filled up his 1990 Honda Prelude with $3.399-a-gallon gasoline at a downtown Los Angeles Shell station.

“Every year I hear about fuel cells and other promising alternative fuel possibilities -- and every year I’m still putting gasoline in my car.”


Kloza said that nationally for the last 25 years, the difference in the price of gas from the winter low to the spring high has been about 59%.

“I don’t think we will see a typical surge, and we don’t have to,” Kloza said. With an increase of just 30%, he said, “you’re talking about 75 cents a gallon more from where they are now.”