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The Basics

$4 gas: Yes, it's on the way

The bad news is that $110 oil hasn't really reached the system yet. The less-bad news is that other countries have it much worse. And the good? Demand actually is falling a bit.

By Lucy Lazarony

Gasoline prices are expected to climb to new highs in the coming weeks, with some analysts predicting a $4-a-gallon national average by Memorial Day.

"Certainly, that's a likelihood," says Linda Rafield, a senior oil analyst at Platts, the energy research arm of McGraw-Hill. "You already have $4 in Northern California."

The national average price for a gallon of regular unleaded gasoline was $3.267 a gallon Thursday, according to AAA. That's a record and one that could be eclipsed daily in the coming weeks because of surging crude-oil prices, which reached $110 per barrel this week.

Of course, that average masks some dramatic differences across the country. The cheapest gas in the country Thursday, according to MSN Autos' cheap-gas finder, was $2.56 in Goldsboro, N.C. -- half the price found in some remote areas along the California coast.

"There's a reason I walk to work," James Willman, who pumps $5.20 regular in the town of Gorda, Calif., told The New York Times.

A rare drop in demand

The price spiral at the pump is far from over.

"There's a good deal of the oil cost that has not been passed through to the pump," says Geoff Sundstrom, a spokesman for AAA.

A 20- to 30-cent increase is expected by Memorial Day, according to the automobile association, but some analysts predict the average price will close in on $4 by the start of the summer driving season.

"We could see $3.75, maybe approaching $4 a gallon," says Bruce Bullock, the director of the Maguire Energy Institute at Southern Methodist University.

As regular gasoline crosses into record territory, diesel fuel is already there, averaging $3.90 a gallon Thursday morning and inflating the price of every good transported by truck.

It may be that America's stubborn driving habits have finally begun to change. The federal Energy Information Administration on Wednesday said gas consumption had fallen 0.7% last week compared with the same week of 2007. Typically, consumption grows 1.5% a year just to keep up with population growth.

Continued: Why now and why so high?

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