Government warns of $4 per gallon gas

Lewiston Sun Journal

By Doug Fletcher , Sun Journal Staff Editor
Thursday, March 13, 2008

On the same day the price of oil set a new intraday trading record - topping $110 per barrel - the nation's energy department said the average price of gasoline could reach $4 per gallon by spring.

West Texas intermediate, a benchmark grade of crude oil, closed at $109.88 per barrel in futures trading on the New York Mercantile Exchange on Wednesday, off only slightly from the all-time record seen earlier in the day. A barrel holds 42 gallons.

Coincidentally, minutes after the close of trade, the Energy Information Administration, an agency of the U.S. Department of Energy, released a weekly analysis headlined: "$4 per gallon?"

In it, EIA forecasts a national peak retail average of $3.50 per gallon of regular gasoline in May and June.

"It is important to note, however," the analysis continued, "that even if the national average monthly gasoline price peaks near that level, it is possible that prices during part of a month, or in some region or at some stations, will cross the $4 per gallon threshold."

EIA used prices on March 10 as an example. The U.S. average price was nearly $3.23 per gallon on Monday, it noted, but the average price in San Francisco was nearly $3.61 per gallon - 38 cents per gallon above the U.S. average - while the average in Denver was $3.04 per gallon, or 19 cents below the U.S. average.

However, EIA's May and June forecast for a $3.50 per gallon national average is based on its March Short-Term Energy Outlook. And that projection sees an average price for West Texas intermediate in May and June at about $97 per barrel, nearly $13 lower than Wednesday's close.

All else equal, the EIA says, "each additional dollar in the oil price adds about 2.4 cents to gasoline prices. Crude oil prices have been highly volatile in recent months. Oil prices significantly above the projected level would greatly increase the prospects for $4 per gallon gasoline in some parts of the country."

Regular gasoline was retailing in the Lewiston-Auburn area on Wednesday in the $3.25 per gallon range.