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The Honolulu Advertiser
Posted on: Wednesday, May 9, 2007

Mainland gas likely to average near $3

By Barbara Hagenbaugh
USA Today

WASHINGTON — The average U.S. gasoline price will hover near the $3 mark this summer and will set a record for the season, the government predicted yesterday.

The average U.S. price for a gallon of regular gasoline will be $2.95 this summer, up 11 cents from the average last year and 14 cents higher than the price predicted a month ago, the Energy Information Administration, the Energy Department's statistical arm, said in a monthly report.

Unanticipated refinery closings heading into the busy summer driving season along with strong demand for gasoline worldwide led to the higher price forecast, the EIA analysts said.

The forecast nationwide average would be the highest ever for the summer, not adjusted for inflation, and 24 percent above the average summer price in 2005.

The EIA defines the summer season as April through September.

Government analysts continued to predict that the average gasoline price would peak in May. But they also said that after dipping slightly in June and July, gas prices would then swing higher in August. That would bring the nationwide average close to the all-time record, not adjusted for inflation, of $3.069 seen in September 2005 following Hurricane Katrina. Adjusted for inflation, the all-time high is $3.223 in today's dollars set March 1981.

After rising in May, "the gasoline price could then ease slightly before returning to the May level in August, as gasoline inventories remain low and the hurricane season approaches," the report said.

Gasoline prices have been climbing in recent months in response to tight inventories, refinery shutdowns and strong demand. Yesterday, statewide average gasoline prices were at or above $3 a gallon in 23 states and the District of Columbia.

But the most recent surge may be coming to an end as several refineries come back on line, leading to increased supplies. The nationwide average price was $3.036 yesterday, up a fraction of a penny from Monday, according to AAA. In recent weeks, daily gasoline prices have been jumping several cents at a time.

That doesn't mean gas prices are going to take a plunge soon. Demand is expected to continue to be strong, which should support prices.