Gas prices could reach $4.25 nationally by Memorial Day
Crude oil fell from 31-month highs Monday, but analysts were predicting that the reprieve wouldn’t reach motorists. Pump prices were expected to continue their rise, with some predicting $4.25 gasoline by Memorial Day.
Some parts of the U.S. already have broken all-time-record prices for retail gasoline set in the summer of 2008. In Hawaii, the nation’s most expensive gasoline reached its highest level ever at $4.537 for a gallon of regular fuel, according to the AAA Fuel Gauge Report. In Wailuku, the state’s highest price was approaching $5 a gallon at $4.909.
The AAA uses figures from more than 100,000 retail sites across the U.S. compiled by the Oil Price Information Service and Wright Express. Similar increases were expected later in the day when the Energy Department releases its separate weekly telephone fuel-price survey.
In California, second only to Hawaii in the U.S., the average was $4.217 a gallon, according to AAA, down slightly overnight from $4.218. A year ago, the California average was $3.108 a gallon. Nationally, AAA said the average reached $3.863 a gallon overnight, up 0.3 cents. A year ago, the national average was $2.854 a gallon.
Hawaii and California are among six states with gasoline averaging more than $4 a gallon, according to AAA. The others are Alaska, Connecticut, Illinois and New York. Other states now have prices averaging above $3.90 a gallon for regular fuel. They are Michigan, Indiana, Wisconsin, Washington, Rhode Island, West Virginia and Nevada.
Oil for June delivery fell slightly by 35 cents, or 0.3%, to $111.94 a barrel on the New York Mercantile Exchange. Futures have risen 32% on the NYMEX in the last year. Brent crude oil for June fell 45 cents, or 0.4%, to $123.54 a barrel on the London-based ICE Futures Europe exchange.
Fuel-price analyst Bob van der Valk said the growing influence of Brent crude oil prices on the U.S. retail fuel market could send gasoline prices to $4.25 a gallon nationally by Memorial Day.
“The problem lies with the U.S. Commodity Futures Trading Commission not having the power to regulate commodity transactions on the ICE. The big money is being moved into Brent and ICE, thereby bypassing the NYMEX and putting the WTI crude oil secondary to Brent. Even the Alaska North Slope crude-oil posting is now tracking the Brent crude oil posting,” Van der Valk said.
If Brent hits $140 a barrel, “it will add another 40 cents per gallon to today's $3.856 per gallon national average price for unleaded gasoline per AAA Daily Fuel Gauge Report. That means $4.25 per gallon for regular gasoline,” Van der Valk said.
Experts warned that the economy would suffer under such high prices.
"Economists expected that the economic recovery could withstand a gradual increase in gas prices to more than $3.50 by summer, but the sudden jump this winter and spring caused most forecasters, this one included, to scale back first-quarter growth estimates from 3.3% to something in the range of 2.8%," said Peter Morici, a professor at the Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission.
-- Ronald D. White