Summer gas prices on the rise
Average cost for a gallon of regular will be 25 cents higher than last year, U.S. says; strong driving season expected.
NEW YORK (CNNMoney.com) - Americans taking to the road now that the weather's getting warmer can expect to pay about 25 cents more for a gallon of gasoline this summer, the government said Tuesday.
The Energy Department, in its seasonal forecast, said the average price of a gallon of regular unleaded will jump to $2.62 over the summer, up from last summer's average of $2.37 a gallon.
But that may be a conservative estimate.
"We're already 40 cents higher per gallon than we were last year," said Geoff Sundstrom, a spokesman for AAA. "We think the Department of Energy may be underestimating what the impact will be at the gas pump."
Despite the forecast for higher prices, not many people are likely to stay home, according to the Energy Department. It predicted that after nearly zero growth in 2005, drivers will use 1.4 percent more gasoline in 2006.
The department's Energy Information Administration said prices for all of 2006 are expected to average $2.50 a gallon for unleaded regular, and $2.40 next year - and some regions could be harder hit.
AAA's Sundstrom, for example, said gasoline could easily exceed $3 this summer in high-price markets like California and other areas.
Diesel isn't expected to get a break either, with prices averaging $2.62 a gallon this summer, up 21 cents from last year.
The agency blamed rising prices on three things - soaring oil prices, added costs from producing lower-sulfur gasoline and phasing out older additives, and rising demand from American drivers.
But the report also said that by September, prices should ease off and drop back from 2005 levels, after pump prices soared last fall following the devastating hurricanes along the Gulf Coast, home to much of the nation's oil drilling and gasoline refining.
There's another warning, though: that hurricanes this year could lead to further price spikes.
The summer forecast comes amid already-soaring gas prices. The average price for a gallon of regular rose another cent Tuesday to $2.686, according to a AAA survey.
Gas prices have jumped nearly 33 cents, or almost 14 percent, in the last month.
While the government has little control over oil prices or how much people drive, it does mandate changes in how gasoline is refined.
The changes include switching to lower-sulfur gasoline, meant to reduce so-called greenhouse gas emissions, and phasing out an older chemical additive that made gasoline cleaner but has been found to cause cancer.
Making lower-sulfur gas is only expected to add 2 cents to pump prices while it slashes harmful emissions by 90 to 95 percent, the agency said.
The phase-out of the chemical additive MTBE, the carcinogen that has been found in groundwater, is expected to be more disruptive. That's because ethanol, the newer corn-based additive that's replacing MTBE, could be in short supply.
AAA's Sundstrom faulted the government for making an abrupt shift away from MTBE and leaving the transition up to market forces.
"The refining industry has had to go on a crash course conversion to ethanol, and of course it's coming at the worst possible time," he said. "It seems the whole process could have been managed better by the federal government."
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