Oil price surge sends gasoline higher
— -- Gasoline prices are blowing past recent estimates, saddling consumers with higher costs just as the summer driving season shifts into high gear.
Pump prices are following the rise in crude oil, which set an 8-month high Thursday on a falling dollar and brighter economic outlook.
Gas prices are not expected to approach last summer's wallet-busting $4 per gallon, but they could eat into consumer spending just as the recession is showing signs of easing.
The nationwide price for a gallon of regular gasoline averaged $2.63 Thursday, up 58 cents since the end of April and $1.01 since pump prices bottomed at about $1.62 at the end of last year.
Don't blame the corner gas station. Oil is pulling gas prices higher. Crude for July delivery settled at $72.68 Thursday, up $1.35, or nearly 2%.
Analysts say investors have been piling into crude as an alternative to a falling dollar. The economic stimulus and Wall Street bailout are helping push the deficit past $2 trillion this fiscal year, igniting fears of a weaker dollar and inflation.
"This is all about money flow," says Tom Kloza, chief analyst at the Oil Price Information Service.
Crude prices are also rising on growing expectations that at least a modest economic recovery will begin later this year. The International Energy Agency said Thursday that it expects oil demand to fall less sharply this year than it previously forecast. And with oil companies slashing exploration during the slump, investors are already anticipating a supply shortage and price run-up in a few years, says Phil Flynn of Alaron Trading.
Yet with current oil supplies robust and demand tepid, experts don't expect prices to soar near-term. Oil stocks totaled 362 million barrels last week, 20% higher than a year ago, according to the Energy Information Administration. U.S. gasoline demand rose 0.4% the past four weeks vs. a year ago, thirstier than the 0.7% decline the first four months of 2009 but less than a typical 2% jump.
EIA said this week it expects pump prices to peak at $2.70 per gallon in July. Just last month, though, it forecast a July peak of $2.25.
