WASHINGTON -- Drivers beware: Today's high gasoline prices soon may look like a bargain, because they are expected to peak at $3.60 a gallon nationwide in coming months, according to a government report released yesterday.
In the latest bit of bad news for cash-strapped consumers, the Energy Information Administration predicted that average gasoline prices will shoot up to $3.60 a gallon in June and average $3.54 per gallon over the summer driving period, an increase of 60 cents a gallon over last summer.
It is entirely possible, EIA Administrator Guy Caruso said, that gasoline prices could top $4 a gallon during parts of the summer driving period, defined as April 1 to Sept. 30.
High-price states such as California, where gasoline cost 32 cents a gallon above the national average in March, are pulling up that average, the EIA said.
Breaking down projected prices, the EIA chief said the West Coast was likely to see an average price of $3.78 a gallon of unleaded gasoline over the summer driving period. That is followed by the Rocky Mountain states at $3.53 a gallon, the Midwest and East Coast at $3.50 a gallon and the Gulf Coast states, closer to the production of much domestic oil, with the lowest average price, $3.41 a gallon.
The expected high prices, Caruso said, will lead to a slight reduction of 0.04 percent in U.S. gasoline consumption during the peak summer driving season, the first time that has happened since 1991.
That year, the downturn in consumption accompanied a brief recession. Caruso said during his agency's annual energy conference that the U.S. economy should grow at a rate of 1.2 percent in 2008 but would contract during the first half of the year.
"So technically, we are projecting ... a small recession in the first half of this year, and that's our assumption," he said.
The EIA - the statistical and analytical arm of the Energy Department - said that the monthly average diesel price was expected to peak at just over $3.90 a gallon this month and average $3.73 a gallon over the summer driving period, an increase of 87 cents over last summer's average. That is bad news for truckers, who deliver much of what we eat, wear and buy.
The primary reason for the high gasoline prices is the record price for crude oil, which settled down 59 cents to $108.50 a barrel in trading yesterday on the New York Mercantile Exchange. The EIA forecast oil prices above $100 a barrel for the remainder of the year.
Oil traders are shrugging off the highest U.S. inventories of oil and gasoline in a year, focusing instead on the growing global demand for oil and its related products and the risks of supply disruptions.
Analysts point to rising global oil consumption, particularly in China and fast-growing Middle Eastern economies, as a cause of tighter global supply. Combined with reduced spare oil-production capacity, this growing demand has led oil traders to fear supply disruptions and drive up prices.
Some analysts at the EIA conference saw a silver lining. Adam Robinson, an energy researcher at New York investment bank Lehman Brothers, predicted that new refineries in Asia and the Middle East and new Saudi oil field production would provide a global supply cushion as early as next year.
"We think it will be very difficult to ignore by the end of next year that we have 4 [million] to 5 million barrels per day of spare capacity, both in the upstream [production] and downstream [refining]," Robinson said. "We believe some of the long-term trends that have been underpinning oil prices over the last five years may start to change."