How high will gas prices go?
Vacationers should see gas prices rise this summer – but nothing like the price spike of 2008.
Drivers beware: Gas prices may be heading up this summer, thanks largely to signs that the economy is strengthening.Skip to next paragraph
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That would follow a typical pattern in which gasoline prices often peak during the season of maximum demand. The big question, of course, is how high prices will go. Energy prices are notoriously volatile and hard to predict. For now, many forecasters see a moderate rise – not the major spike that walloped American consumers in 2008 (see chart).
Here's more on the outlook and what it might mean for you:
Where are prices at the pump headed?
The US average retail price will peak this summer at slightly above $3.10 per gallon, predicts Patrick DeHaan, who tracks the industry as a senior analyst for GasBuddy.com. That would be up about 8.5 percent from the beginning of this month, according to the US Energy Information Administration.
Other industry analysts concur.
During the summer vacation season, the firm estimates, the price of crude oil will rise by just a few dollars from the level reached in early April.
Every $1 rise in the cost of a barrel of oil can add about 2-1/2 cents to the price of a gallon of gas. In 2009, for instance, when oil surged upward by $42 a barrel, US gasoline prices rose by $1 a gallon.
Is there risk of a big price spike, as occurred in 2008?
That's always a risk. For example, an escalation of tensions between Western nations and Iran over that nation's alleged nuclear-weapons ambitions could have a big impact on oil markets. That said, the environment in energy markets is very different today from the way it was in early 2008. US consumer demand is lower.
The status of refineries is another driver of gas prices. "We're also heading into a summer with a lot of refinery capacity," Mr. Cohan says, compared with the tight refinery conditions that existed for much of 2006-08.
A lively debate also rages over the degree to which the OPEC cartel influences prices, whether the US refining industry is concentrated in too-few hands, and whether speculative investors contribute to price spikes.