Gasoline’s Prepping For A Return To $4 A Gallon - Spokane, North Idaho News & Weather KHQ.com

Gasoline’s Prepping For A Return To $4 A Gallon

KHQ.COM - When the U.S. Energy Department mentioned in a report this week that retail gasoline prices could top $4 per gallon later this year and diesel prices may rise 14% this year, that should've been cause for alarm for consumers who have already seen a steady climb in fuel prices in the last three months.

"Retail gasoline and diesel prices are usually near their lowest point for the year between December and February," said Brian Milne, refined fuels editor at Telvent DTN. But the run-up in prices started in the fourth quarter, with prices continuing to climb on expectations that "an improving U.S. and world economy will bolster demand for fuel."

Consumers last saw $4 per gallon prices at the pump in September of 2008, according to data from the Oil Price Information Service. Regular gasoline reached a record high at $4.11 per gallon on July 17, 2008.

As of Wednesday, the national average for regular gas stood at $3.09. That's up nearly 4% from a month ago and more than 12% above the year-ago average, data showed.

Diesel fuel has seen similar gains, with diesel prices at $3.34 per gallon as of Wednesday, up nearly 15% from a year ago at levels not seen since October 2008.

And prices for both fuels are likely to continue rising.

In a monthly outlook report, the U.S. Energy Information Administration, the reporting arm of the Energy Department, said it expects regular gasoline to average $3.17 at the pump this year, 39 cents higher than last year.

It also sees a 25% chance that the average will exceed $3.50 in June through September, as well as an 8% to 10% probability that prices will top $4 in August and September of this year.

Prices for on-highway diesel fuel retail prices will likely average $3.40 per gallon in 2011, up from $2.99 in 2010, the EIA said.

"Fuel prices are rising strongly across the board on the back of the robust-looking gains that have been seen recently in the crude-oil market," said Matt Parry, senior oil consultant at KBC Process Technology Ltd. "Not only that, but recent months have enjoyed a consistent thread of surprisingly strong demand metrics right across the globe."

Contributing factors

There are, indeed, a lot of good excuses for the spike in fuel prices — and plenty of reasons why prices will be much higher this year.

Crude-oil prices /quotes/comstock/21n!f:clg11 (CLG11 91.19, -0.21, -0.23%)  traded at a two-year high above $90 per barrel, and it's easy for traders and consumers alike to attribute that, at least in part, to the recent shutdown of the Trans-Alaska Pipeline System.

The pipeline was restarted late Tuesday, but is likely to have a "temporary firming and subsequent softening" effect on fuel prices once it's up to full capacity, said Bob van der Valk, fuel-pricing analyst at 4Refuel LP in Lynnwood, Wash.

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