[Oil jumped to another record on Tuesday, and the government said it expected gasoline prices to peak at a national average of $3.73 a gallon in June, just as the summer driving season kicks off.
Oil prices have nearly doubled in a year. Gasoline is selling for a national average of about $3.61 a gallon, according to AAA, the automobile club, a penny less than the record set on May 1 but 58 cents higher than a year ago.
Domestic gasoline consumption is likely to fall more steeply than expected this year, the Energy Department said, an indication that higher prices are cutting into the driving habits of many Americans. But gasoline prices are expected to rise nonetheless and should average $3.52 a gallon for the full year, or 71 cents above their average price in 2007, according to the government’s latest estimates.
“In the past, high prices could be offset by borrowing or making more money,” said Adam Robinson, an analyst at Lehman Brothers. “It’s really when you have the triple bite — a weaker economy, less access to credit, and higher prices — that you see the consumer recoil.”
In its monthly report, the Energy Department projected that domestic petroleum consumption would decline by about 190,000 barrels a day this year, a result of the economic slowdown and high prices. That is a sharper drop than the 90,000-barrel-a-day decline projected by the department last month.
As demand continues to outpace the growth in oil supplies, analysts expect little relief in prices. A shortfall in supplies over the next two years will probably send oil to $150 to $200 a barrel, Goldman Sachs said in a new report.
Analysts’ forecasts for the price of gasoline over the next few years run as high as $7 a gallon.]-NYT
