Summer gas prices up 21% from '07?

By Elizabeth Strott

It's still spring, and already gas prices are soaring.

Prices at the pump have hit record after record over the past few weeks, and the Energy Information Administration predicts gas prices will be up 21% this summer from a year ago.

Gasoline is expected to average $3.54 for a gallon of regular over the summer, with prices peaking at $3.60 in June, the statistical agency said this week. Gas prices averaged $2.93 a gallon last summer.

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Drivers in some states should be prepared for $4-a-gallon gasoline because of higher taxes, distribution costs and quality specifications, the agency warned Tuesday in its short-term energy outlook. California and other West Coast states "are often well above the U.S. average," it said.

A slowdown in demand

The surge in gas prices will directly affect consumers this summer, cutting demand by 85,000 barrels, the first summertime decline since 1991, energy officials predicted.

Demand is already starting to taper off, according to MasterCard's (MA, news, msgs) weekly SpendingPulse report. U.S. gasoline demand fell 6.8% in the week ending April 4 from the same week a year ago. Consumers purchased an average 9.04 million barrels of gasoline a day last week, down from 9.71 million a year earlier, according to the report.

Gasoline prices hit another record this morning, AAA's Fuel Gauge Report said, with the average price of regular gasoline rising to $3.34 a gallon. The report is derived from credit-card transactions at more than 85,000 stations around the United States.

A separate report, released Sunday, noted a similar jump in gas prices. The average price of self-serve regular gas hit another record over the past two weeks, up 5 cents to $3.32 per gallon, according to the Lundberg Survey. That study polls 5,000 gas stations across the country.

According to the Lundberg Survey, the most expensive place to fill up was San Francisco, at $3.72 a gallon; the cheapest was Newark, N.J., where drivers were paying an average of $3.03 a gallon.

Oil keeps climbing

The surging price of oil hasn't been helping matters. Light, sweet crude jumped $2.37 to close at a new record of $110.87 a barrel today after the Energy Information Administration reported a weekly decline of 3.2 million barrels of oil supplies. Analysts had expected inventories to rise by 2.7 million barrels.

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Gasoline supplies fell by 3.4 million barrels last week.

But Abdullah al-Badri, the secretary-general of the Organization of Petroleum Exporting Countries, told Iran's IRNA news agency that high oil prices haven't been caused by shortages but because of "the decrease in the dollar's value, shortage of refinery capacity and some political tensions in the world."

OPEC pumped an average of 32.35 million barrels of oil per day in March, a drop of 85,000 barrels from its daily average for February and its first decline in seven months.

A weaker dollar has prompted many investors to turn to safer commodity investments such as oil to hedge against inflation. A disappointing U.S. unemployment report for March showed a loss of 80,000 jobs, which means lower demand for energy, Cameron Hanover oil analyst Peter Beutel wrote in a note to clients Monday. It also means "an increasing likelihood" of another Federal Reserve interest-rate cut and perhaps a larger one, he said.

In a subsequent report, Beutel said today: "People are feeling a lot more than the 7% or 8% (inflation) being reported. Oil prices have gained more than 30% since August."

The Energy Information Administration expects oil to average $101 a barrel this year before falling to $92.50 in 2009.

"The global oil market remains fundamentally tight entering the second quarter, despite a slowdown in U.S. oil consumption and growing risks to global economic growth," the agency's short-term outlook said. "The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices. The flow of investment money into commodities has contributed to crude oil price volatility."

Phil Flynn, a senior trader at Alaron Trading, told Bloomberg News on Monday: "We're seeing the funds jump in and buy commodities. Commodities had by far the best returns during the last quarter. It would be risky to bet that either the stock market or dollar has hit a bottom yet."

Average gasoline prices as of April 9

State	Regular	Premium	Diesel	State	Regular	Premium	Diesel
Alaska	$3.61	$4.04	$4.10	Montana	$3.33	$3.64	$4.08
Alabama	$3.26	$3.59	$3.93	North Carolina	$3.31	$3.67	$3.97
Arkansas	$3.24	$3.64	$3.92	North Dakota	$3.31	$3.55	$3.98
Arizona	$3.29	$3.63	$4.00	Nebraska	$3.34	$3.51	$3.93
California	$3.75	$4.05	$4.24	New Hampshire	$3.16	$3.55	$4.07
Colorado	$3.30	$3.68	$3.98	New Jersey	$3.07	$3.42	$4.03
Connecticut	$3.41	$3.80	$4.25	New Mexico	$3.36	$3.73	$4.01
District of Columbia	$3.41	$3.74	$4.12	Nevada	$3.47	$3.79	$4.02
Delaware	$3.24	$3.59	$4.08	New York	$3.44	$3.76	$4.35
Florida	$3.40	$3.75	$4.04	Ohio	$3.27	$3.62	$4.07
Georgia	$3.30	$3.71	$3.98	Oklahoma	$3.23	$3.52	$3.84
Hawaii	$3.67	$3.95	$4.23	Oregon	$3.44	$3.68	$4.00
Iowa	$3.29	$3.63	$3.95	Pennsylvania	$3.31	$3.65	$4.24
Idaho	$3.31	$3.59	$4.17	Rhode Island	$3.24	$3.56	$4.18
Illinois	$3.46	$3.84	$4.14	South Carolina	$3.19	$3.56	$3.89
Indiana	$3.35	$3.71	$4.05	South Dakota	$3.34	$3.70	$3.95
Kansas	$3.26	$3.47	$3.95	Tennessee	$3.22	$3.57	$3.91
Kentucky	$3.29	$3.69	$3.91	Texas	$3.28	$3.59	$3.94
Louisiana	$3.26	$3.64	$3.92	Utah	$3.27	$3.60	$4.06
Massachusetts	$3.17	$3.54	$4.14	Virginia	$3.27	$3.57	$3.96
Maryland	$3.31	$3.61	$4.06	Vermont	$3.29	$3.70	$4.20
Maine	$3.31	$3.68	$4.15	Washington	$3.51	$3.82	$4.15
Michigan	$3.40	$3.74	$4.15	Wisconsin	$3.39	$3.68	$4.05
Minnesota	$3.25	$3.47	$3.95	West Virginia	$3.42	$3.75	$4.15
Missouri	$3.19	$3.51	$3.86	Wyoming	$3.22	$3.57	$3.96
Mississippi	$3.25	$3.58	$3.87
Source: AAA