Gas prices edge up after months of plunging
— -- Have gasoline prices hit bottom? Probably not, but they are taking a midair pause.
A record 86-day streak of falling pump prices ended Friday, with the national average for a gallon of regular gasoline at $1.656. Prices edged up to $1.66 on Saturday and hovered there the past couple of days, the Oil Price Information Service says.
Since hitting $3.85 on Sept. 17 — 26 cents below the July 11 peak of $4.11 a gallon — gas prices dropped every day for nearly three months, OPIS says.
"It was a hell of a streak," says OPIS chief oil analyst Tom Kloza.
Several forces have pushed up oil and gasoline prices lately, including increased consumption by U.S. motorists in response to the bargain prices. In a USA TODAY/Gallup Poll last weekend, 12% of respondents said they've gone back to old driving habits.
Also, OPEC, at a meeting this week, is expected to cut oil production by as much as 2 million barrels a day. Refiners, meanwhile, have slashed output in response to diminishing profit margins. And a weakening dollar drives investments into commodities, such as oil.
Kloza believes gasoline prices have leveled off and could rise a few cents in coming weeks as holiday travelers hit the roads. But he adds that demand typically weakens in the winter, a phenomenon likely to be abetted by more gloomy economic news. By mid-February, Kloza expects prices to resume their decline, reaching an average of about $1.50 a gallon.
On Monday, oil prices dropped 4% on more dark economic news. Crude for January delivery settled down $1.77, or 4%, at $44.51 Monday. That's just a blip in a likely rally, says Peter Beutel, president of energy risk management firm Cameron Hanover. An oil rally could last as long as five months, Beutel says, nudging crude to $70 a barrel and gasoline to more than $2 a gallon. "This leg of the (price drop) seems to be over."
Like Kloza, however, Beutel says the slumping economy should pull prices toward $1.50 a gallon within months.
Longer term, Kloza forecasts a modest spring and summer rally that sends prices as high as $2.25 a gallon. Last week, the U.S. Energy Information Administration estimated gasoline prices will average $2.03 a gallon in 2009.
