According to a new report released by the Energy Department's Energy Information Administration, the national average price of gas will peak this June at approximately $3.60 per gallon. If this prediction holds true it will mean a 30 cent increase over the current record-high of $3.339, which was reached just this past Monday.
The new figure is up from previous EIA estimates of a $3.50 per gallon peak, but still better than the $4 figure some analysts believe is just around the corner. Diesel already has a national average price of $4.02, which may get worse as more oil-burning passenger cars are sold in the U.S. The EIA says the price hikes are based on their belief that oil prices will average $101 per barrel this year, up from a previous projection of $94. Next year, however, the agency expects prices to fall back to an average of $92.50 a barrel, which will hopefully ease the pain at the pump.
Some lawmakers have suggested increasing gas taxes as a way to reduce consumption, but according to the EIA this latest price hike will alter American driving habits without the need for regulation. The agency is predicting a drop in demand during the peak summer season of 0.4 percent, and expects the average American consumption of petroleum products to decline by some 90,000 barrels a day this year. Quite a change considering they earlier projected a 40,000 barrel a day increase over the same period. However, the EIA does not believe demand will drop in India or China, so don't expect lower prices anytime soon.
The record high reached Monday represents a 55 cent increase in the average price per gallon from a year ago. A majority of Americans are already considering fuel-economy before power or safety when buying a new car, so it's hard to say what further effect an additional 30 cent hike in just two months will have. Many parts of the country have had $3.60 per gallon gas (or worse) for some time and drivers have managed to survive. Hopefully the EIA is right and $3.60 really is the peak, not just another step in an endless upward cycle.
Source: Yahoo Finance