Gasoline Prices Could Head Up Again

Gas prices soared above $3 per gallon in 2006, then fell later in the year. Through it all, motorists continued driving. Forecasters say there could be another jump in gas prices next year.

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Gasoline prices on average were even higher this year than they were in 2005. To find out what the New Year will bring, NPR's Scott Horsley grilled the experts for some gas price predictions.

SCOTT HORSLEY: If you're looking for someone who follows gas prices closely, you don't have to look very far. Almost anyone can tell you what it cost to fill the tank this week, and drivers like Nick Barrard(ph), Matt Derek(ph) and Parker Fino(ph) have a little doubt about what prices will do next year.

Mr. NICK FERRARD (Driver): Go up, go up dramatically, and it's going to go a lot higher.

Mr. MATT DEREK (Driver): At least a dollar or two higher.

Mr. PARKER FINO (Driver): I think that they're going to continue to keep rising, and we're not going to see any relief.

HORSLEY: Professional price watchers are a little more cautious. Gasoline prices are so volatile, the Auto Club's Jeff Sundstrom has sworn off guessing at any particular price.

Mr. JEFF SUNDSTROM (Auto Club): It's been our experience that those who predict specific prices are invariably proved wrong. And so we generally talk about trends, which we believe are more helpful to the typical consumer in terms of their family budgeting.

HORSLEY: And the trend that AAA expects is that gasoline prices will hold fairly steady for the few months of the new year, then begin decline in the spring - first on the West Coast and pretty soon across the country. That's been the pattern in recent years. But Sundstrom hopes the peak price this coming year will not be as high as in 2006.

Mr. SUNDSTROM: We're hopeful that if the oil price stays around $62 per barrel and we don't have some cataclysmic event, either manmade or natural, that we will not see return of a $3 average gas price across the U.S.

HORSLEY: The price of gasoline briefly topped $3 a gallon in each of the last two years, thanks to both manmade and natural cataclysms. In 2005, it was the Gulf Coast hurricanes.

This past year, one could blame a series of problems in oil-producing countries like Iraq, Nigeria and Venezuela, as well as refining challenges here at home as the switch was made to ethanol from the gasoline additive known as MTBE.

As the year comes to a close, OPEC has tightened the oil test and is threatening to cut more supply in February. Analyst Doug MacIntyre of the Energy Department's Information Arm says that could leave oil producers outside of OPEC hard pressed to meet demand.

Mr. DOUG MACINTYRE (Information Arm, Energy Department): It would mean that oil markets would likely remain tight. Our forecast has oil averaging somewhere in the 64, $65 per barrel range. Maybe slightly below where it averaged in 2006, but still above where we are right now.

HORSLEY: But MacIntyre admits there a lot of unknowns that could affect the price of oil and gasoline, from how quickly new supplies are developed to how cold it gets this winter.

Mr. MCYNTIRE: Probably the largest question mark is the global economy.

HORSLEY: A stronger economy means more demand for oil, and therefore higher prices. So far, consumers' demand for oil and gasoline has remained surprisingly strong, even as prices have climbed. MacIntyre notes that while a 25 cent jump in the price of gasoline gets a lot of people angry, it will only cost the average driver about $150 a year.

Mr. MACINTYRE: For many people, that is a substantial amount. But for a lot of other people, you know, they spend probably a lot more than that drinking coffee.

HORSLEY: Of course, rising energy prices can have ripple effects. Starbucks cited fuel cost as a factor in October when it raised the price of coffee by about a nickel a cup.

Scott Horsley, NPR News.

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