Analysts Say Summer Gas Prices to Remain Flat

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By Sandy Shore, AP Business Writer

Motorists planning a late-summer getaway should find gasoline prices little-changed through August.

An oil price rally caused the week-over-week increase, but prices aren't likely to rise much more because supplies are still ample and demand hasn't improved much this summer, analysts say.

The national average for a gallon of unleaded gasoline was $2.774 Monday, according to AAA, Wright Express and Oil Price Information Service. That's about 3.9 cents higher than a week ago and 13.1 cents higher than a year ago.

In its weekly report on pump prices, the Energy Department's Energy Information Administration said Monday that the national average for a gallon of unleaded regular was $2.783, up 4.8 cents from a week ago. California drivers paid the most at $3.172 a gallon. Motorists in Rocky Mountain states were next at $2.790, followed by Midwest and East Coast drivers. The average pump price was lowest in Gulf Coast states, at $2.641 a gallon.

Gasoline prices typically are affected by the price of crude oil, the strength of the dollar, how far a state is from refining hubs and the amount of state tax added to the federal tax of 18.4 cents a gallon.

California has some of the highest prices in the country, due to a combination of higher taxes and stricter rules about the types of gas blends sold.

The Rockies see higher prices because of a limited number of refineries and the distance to supplies. Texas and the Gulf Coast region have readily accessible oil supplies and typically lower tax rates, according to the American Petroleum Institute.
The dollar can impact prices because oil, like most commodities, is priced in dollars. A weaker dollar can make oil more attractive to foreign buyers.

In a research report, Cameron Hanover energy research agency said oil supplies are about 20.6 percent higher than they were two years ago, while gasoline reserves are about 6.6 percent higher.

It's an indication that oil traders are basing their purchases and sales more on technical factors than basic facts about the market. "If this market ever does return to fundamentals, we could be in for a very steep decline in prices," the agency said.

Oil prices matched an increase in U.S. stock markets as traders and investors waited to see if the Federal Reserve plans to launch new economic stimulus programs after its Tuesday meeting. The Dow Jones Industrial Average closed about 45 points higher. The NASDAQ and the S&P 500 were slightly higher as well.

Benchmark crude for September delivery rose 78 cents to settle at $81.23 a barrel on the New York Mercantile Exchange. Oil has stayed above $80 a barrel for six straight sessions.

Michael Lynch, president of Strategic Energy & Economic Research, said he expects oil prices to remain above $80 a barrel during the active hurricane season, which usually runs through mid-September before tapering off.

Oil traders also have been closely watching the stock markets to gauge consumer confidence in the economy, which Fed Chairman Ben Bernanke recently characterized as "unusually uncertain."

In other Nymex trading in September contracts, heating oil rose 0.66 cent to settle at $2.1538 a gallon, gasoline gained 0.60 cent to settle at $2.1187 a gallon and natural gas fell 15.8 cents to settle at $4.309 per 1,000 cubic feet.
In London, Brent crude added 83 cents to settle at $80.99 a barrel on the ICE Futures exchange.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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