Feds raise gas-price estimates
They predict average price to peak at $3.73 a gallon in June
The Energy Department predicts average monthly gasoline prices should peak at $3.73 a gallon in June, an increase of 13 cents from last month's estimate. Regular-grade gasoline is expected to average $3.52 a gallon in 2008, 71 cents above last year's average.
Diesel fuel prices are projected to average $3.94 per gallon this year, up from $2.88 per gallon in 2007.
At the pump, gas prices remained at a national average of $3.61 a gallon Tuesday, and are well above the year-ago average of $3.04 a gallon, according to AAA and the Oil Price Information Service. Diesel prices remained at about $4.24 a gallon, and both were within about a penny of record highs set last week.
EIA expects average daily oil consumption in the U.S. will fall by about 190,000 barrels this year because of the economic slowdown and high prices. That is more than double last month's forecast of a 90,000 barrel per day decrease.
Oil futures blasted to a new record of over $122 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages.
Light, sweet crude for June delivery jumped to a new record of $122.73 a barrel before retreating slightly to trade up $2.10 at $122.07 on the New York Mercantile Exchange.
Oil prices have nearly doubled from about $62 a barrel a year ago, which Goldman sees as a sign that the world is in the midst of a "super spike" in oil prices. Analyst Arjun Murti said in a research note released Monday that prices would ultimately force demand to fall sharply.
Not everyone shares Goldman's view. Tim Evans, an analyst at Citigroup Inc., countered Goldman's analysis with a note predicting that crude prices could as easily fall to $40 a barrel as rise to $200 over the next two years because supplies are, as Evans put it, comfortable.
James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com, said Goldman's prediction isn't necessarily new: "We've heard numbers like these out of Goldman Sachs, especially over the last 12 months."
Indeed, it's not the first time Murti has espoused a super spike theory; in an April 2005 note, he predicted the oil market was in the early stages of an unprecedented rally that would send prices from a then-record of about $57 a barrel to $105.
But some investors respond to such predictions by buying, Cordier said.
"You're going to see new highs for gas prices, probably for the weekend," said Cordier, who predicts an average price of $4 a gallon in the coming weeks.
Also Tuesday, Sens. Jack Reed of Rhode Island and Carl Levin of Michigan asked President Bush to create a federal task force "to investigate whether speculators are driving up prices in energy commodity markets through manipulative or deceptive practices." The Democrats asked that the group include the secretary of the treasury, the attorney general, and the chairmen of the Securities and Exchange Commission, Commodities Future Trading Commission, Federal Trade Commission and Federal Energy Regulatory Commission.
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