• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Analysts Don't Expect Gas Prices To Drop Much Lower

Posted on: Tuesday, 20 September 2005, 18:00 CDT

Sep. 20--BLOOMINGTON -- Gasoline prices continue to trickle down after spiking to record highs in the wake of Hurricane Katrina, but it appears the days of $2 gas are long gone.

"There's no realistic scenario that could create ($2 a gallon gas)," said Jake Bournazian, an economist with the Energy Information Administration in Washington, D.C.

"We'd have to stop living for four weeks, stop turning on the lights, stop cooking, stop driving, stop everything," he added, saying the demand for crude oil products is too huge for a major drop in gasoline prices.

Regular unleaded gas averaged about $2.58 a gallon Monday in the Twin Cities -- a 60-cent drop from the record $3.20 a gallon in the days following Hurricane Katrina's late August rampage through the Gulf Coast and the oil industry.

"Things look good in your area. Demand is down. (Gulf coast) pipelines have had repairs," Bournazian said. "Prices could go down another 5 to 10 cents."

Comparatively, though, gas prices don't look that good.

Last year, gas cost about $1.80 a gallon in Bloomington-Normal, according to the AAA-Chicago Motor Club. At the beginning of July, it sold for around $2.10 a gallon.

Now, however, the gas-price cellar is $2.50 per gallon, Bournazian said, and it may be tough to keep prices that low.

Wholesale prices dropped at the same time drivers curbed gas use after traveling over the Labor Day weekend, said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association in Springfield.

"The free market is working. Competition was heightened because people quit buying (gas)," he said. "And wholesale prices did get down a little bit."

But the market is volatile. Demand could increase at any time, and wholesale prices crept up slightly Friday as more Tropical Storm Rita approached the Florida coast, Fleischli said.

Other factors could drive up gasoline costs, too, he said.

A severe winter, for example, could require the production of more heating oil, which would decrease the output of gasoline because both fuels come from the same barrel of crude oil.

Meanwhile, U.S. oil refineries continue to operate at about 88 percent capacity following Hurricane Katrina, Bournazian said. Prices could drop when production picks up, though it's unlikely given the cold winter months ahead and the added need for heating oil.

"You're going into the highest (crude oil) demand period of the year. And we're still in hurricane season," Bournazian said. "Any further disruption in the crude oil market is going to raise prices. All we can hope for is stability."

-----

To see more of The Pantagraph, or to subscribe to the newspaper, go to http://www.pantagraph.com.

Copyright (c) 2005, The Pantagraph, Bloomington, Ill.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: The Pantagraph, Bloomington, Ill.

More News in this Category