Gas Prices : the worst is over...for now

[Cock Puncher]

Gas prices: The worst is over . . . for now

Pump prices slip a second straight week, and with more oil in the pipelines and in inventory, analysts see as much as a quarter coming off. But prices remain vulnerable.

By MSN Money staff

Not only are gasoline prices starting to come down, they may come down a lot.

The national average price for regular unleaded, as measured weekly by the federal Energy Information Agency (EIA) and daily by the AAA's Fuel Gauge Report, stands at $2.03, down from a peak May 26 of $2.054 (56 cents higher than a year ago). Is the worst over?

Yes, for now, say energy experts. Regular unleaded should be "well below $2 a gallon by next weekend," Tom Kloza, an analyst at the Oil Price Information Service, told USA Today, and could drop to as low as $1.75 this summer before rebounding to records again in August.

The EIA, the Energy Department's analytical arm, said gasoline prices may fall below $2 a gallon in the coming weeks as additional oil from Saudi Arabia and other OPEC members begins arriving in the U.S. market and crude inventories rise.

In its June short-term forecast, released Tuesday, the EIA said it expects regular gasoline to average $1.91 a gallon for the summer. For the second half of the year, it expects regular to fetch an average of $1.82 a gallon. Both prices remain well above the 2003 averages.

Energy Secretary Spencer Abraham hailed the news. "We have seen a modest increase in gasoline stock levels and a decrease in crude oil prices, which indicate that the situation may have entered a phase that will lead to more sustainable supply levels and prices," Abraham said.

Prices have little influence on demand
The startling run-up in gasoline prices did not kill the nation's appetite, only dulled it. The DOE says demand for gasoline continues to climb, although at a slower rate. Despite numerous surveys and other indicators of interest in smaller sport-utilities and hybrid-electric vehicles, sales of large trucks and sport-utilities actually rose in May (with the help of rebates as large as $5,000).

"At the end of the day, we do have to look at the actual behavior in the marketplace," said Paul Ballew, General Motors' executive director of market and industry analysis. Ballew told Automotive News that GM's research indicates that gasoline prices would have to rise to $2.50 to $3 per gallon and stay there to change buying decisions.

And pricing remains fragile, analysts warn.

"While the speculative bubble over OPEC supply flow might be temporarily popped, seeing renewed terrorist activity inside Saudi Arabia, or against Iraq's infrastructure, could instantly rekindle buying," John Kilduff, an analyst at Fimat USA, said in a research note.

Every dollar increase or decrease in the cost of a 42-gallon barrel of crude translates into 2.4 cents at the pump. Crude oil prices account for 45% of the cost of a gallon of gasoline, according to the EIA. Taxes make up 23%, refining 22% and distribution/marketing 10%.

No one expects prices to return to last year's sub-$1.50 levels, so many of the adjustments made to accommodate $2 gasoline may be around for a while.

Taxi drivers, for example, have successfully pushed through rate increases across the country. More people are flying this summer than since Sept. 11, according to the Transportation Security Administration. The agency predicts about 200 million people will fly on U.S. carriers between the Memorial Day and Labor Day weekends, a 10% increase over last year.

How does what you pay compare?
State Regular Mid Premium Diesel
Alaska $2.13 $2.25 $2.38 $1.95
Alabama $1.91 $2.04 $2.11 $1.69
Arkansas $1.93 $2.04 $2.17 $1.70
Arizona $2.13 $2.23 $2.35 $2.11
California $2.35 $2.50 $2.54 $2.28
Colorado $2.01 $2.15 $2.24 $1.94
Connecticut $2.17 $2.35 $2.42 $1.91
District of Columbia $2.10 $2.24 $2.31 $1.93
Delaware $2.07 $2.20 $2.30 $1.84
Florida $2.02 $2.19 $2.23 $1.82
Georgia $1.90 $2.04 $2.13 $1.65
Hawaii $2.34 $2.47 $2.52 $2.35
Iowa $1.95 $2.05 $2.15 $1.75
Idaho $2.09 $2.20 $2.27 $2.13
Illinois $2.06 $2.22 $2.29 $1.85
Indiana $1.98 $2.13 $2.19 $1.71
Kansas $1.98 $2.04 $2.11 $1.80
Kentucky $1.91 $2.05 $2.14 $1.66
Louisiana $1.92 $2.05 $2.15 $1.69
Massachusetts $2.10 $2.26 $2.35 $1.86
Maryland $2.04 $2.17 $2.22 $1.81
Maine $2.07 $2.24 $2.30 $1.83
Michigan $2.06 $2.19 $2.27 $1.76
Minnesota $1.95 $2.03 $2.08 $1.75
Missouri $1.87 $1.95 $2.06 $1.66
Mississippi $1.92 $2.02 $2.11 $1.64
Montana $2.01 $2.09 $2.19 $1.99
North Carolina $1.94 $2.06 $2.15 $1.71
North Dakota $2.00 $2.07 $2.15 $1.79
Nebraska $2.02 $2.07 $2.12 $1.78
New Hampshire $2.05 $2.22 $2.30 $1.80
New Jersey $2.03 $2.17 $2.26 $1.72
New Mexico $1.96 $2.09 $2.18 $1.89
Nevada $2.28 $2.40 $2.49 $2.17
New York $2.21 $2.36 $2.41 $1.93
Ohio $1.98 $2.11 $2.19 $1.75
Oklahoma $1.86 $1.92 $2.03 $1.64
Oregon $2.28 $2.40 $2.44 $2.20
Pennsylvania $2.03 $2.14 $2.24 $1.84
Rhode Island $2.14 $2.28 $2.35 $1.89
South Carolina $1.88 $2.00 $2.09 $1.65
South Dakota $1.99 $2.12 $2.20 $1.78
Tennessee $1.92 $2.03 $2.13 $1.69
Texas $1.90 $2.01 $2.09 $1.71
Utah $2.03 $2.14 $2.23 $2.04
Virginia $1.94 $2.03 $2.11 $1.71
Vermont $2.05 $2.21 $2.30 $1.87
Washington $2.28 $2.37 $2.48 $2.25
Wisconsin $2.11 $2.19 $2.29 $1.81
West Virginia $1.99 $2.08 $2.18 $1.80
Wyoming $1.93 $2.01 $2.15 $1.89
U.S. average $2.03 $2.15 $2.23 $1.82


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