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Gas prices predicted to drop 50 cents

By Associated Press

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NEW YORK >> Some relief from suffocating gas prices will likely arrive just in time for summer vacation. Expect a drop of nearly 50 cents as early as June, analysts say.

After rocketing up 91 cents since January, including 44 straight days of increases, the national average stopped just shy of $4 a gallon last week and has retreated to under $3.98. (In Hawaii, the average price Thursday was $4.56, according to the Oil Price Information Service.) A steady decline is expected to follow.

It might not be enough to evoke cheers from people who recall gas stations charging less than $3 a gallon last year. But it would still ease the burden on drivers. And it might help lift consumer spending, which powers about 70 percent of the economy. A 50 cent drop in prices would save U.S. drivers about $189 million a day.

Typically, gas prices peak each spring, then fall into a summertime swoon that can last several weeks. This year’s decline should be gradual but steady, said Fred Rozell, retail pricing director at the Oil Price Information Service.

Some drivers might not notice much of a price drop at first, Rozell cautioned. When average gas prices fluctuate nationally, some areas are affected more than others. In cities with many service stations, for instance, prices can be slower to fall. It’s even possible prices will rise at some stations in coming days even if they decline nationally.

And after the galloping surge in prices this year, many gas station owners are reluctant to lower prices until they see their competition doing the same, Rozell said.

“It’s just the nature of the business,” he said. “They’re going to try to get the most they can.”

Station owners still feel bruised from their own higher costs earlier this year. In some cases, their suppliers raised prices so quickly that station owners couldn’t pass along those higher costs to consumers fast enough. Competition also makes it hard for some stations to raise prices.

Last week, a confluence of factors stemmed the rise in gasoline prices.

Oil, which is used to make gasoline, tumbled 15 percent in price. Investors who were worried about rising oil supplies and falling gasoline demand in the United States helped drive down the price. Oil prices were also responding to a rising dollar. Oil is priced in dollars, so a stronger dollar makes oil less appealing to people buying with foreign currencies.

It was the largest weekly drop for oil in 2 1⁄2 years. Some analysts predict that oil will keep falling in coming weeks — from about $97 a barrel to about $80.

Many U.S. refineries also are expected to boost production after a series of unplanned shutdowns stemming from power outages and other problems. Those refineries would pump more gasoline to gas stations. And the increased supplies should push down prices.

“It’s going to be $3.50 per gallon this summer,” oil analyst Andrew Lipow said.

“At the very least, you can expect prices to fall 40 cents or so over the next several months.”

But even if oil falls steeply in coming months, analysts note that world demand continues to rise. Lipow predicts that oil could return to about $110 a barrel by year’s end.

If that happens, and if any major hurricanes this year disrupt refining operations later this year, expect gasoline prices to once again flirt with $4 a gallon.

“It all depends on the weather,” Rozell said. “Trying to predict anything beyond 30 days is witchcraft.”






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