W A S H I N G T O N, April 6 – The good news for consumers is gas prices are anticipated to drop this summer. But the bad news is the decline will be slow.
With an increase in international oil production as a backdrop, the Energy Department today dramatically revised its forecast for summer gasoline prices. The agency said prices should peak later this month and begin dropping sometime in May, averaging about $1.46 a gallon throughout the summer.
Even Cheaper Fall Prices
And there's even more good news: Gasoline prices may dip lower still by fall, according to the agency. Prices may fall to a national average of $1.39 after Labor Day, the department's Energy Information Administration said in its revised short-term forecast.
"By then I expect we will have started to see some economic growth deterioration and I think from there we probably will see demand start to come under some pressure," said Peter Beutel, president of Cameron Hanover, an energy risk management firm in Connecticut. "So, I think we probably will see prices closer to $1.30 or maybe even $1.25."
What Happened to the $2 Estimate?
Just a month ago, the Energy Department said even with increased oil production, gasoline prices were expected to soar to a national average of as much as $1.80 a gallon and likely reach $2 a gallon in some places by July.
So what's changed between now and then? A key international oil meeting in Vienna, Austria.
The EIA in its latest forecast assumed additional oil would begin hitting the U.S. market by June as a result of a decision March 28 by the Organization of Petroleum Exporting Countries. OPEC agreed to boost production by as much as 1.7 million barrels a day.
Other non-OPEC producers also have said they would increase production. And production increases mean refilled petroleum stocks and lower prices for oil products including gasoline.
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