U.S. gasoline prices have likely hit bottom-Govt
Source: Reuters
By Tom Doggett WASHINGTON, Jan 31 (Reuters) - U.S. retail gasoline prices appear to have bottomed out now that crude oil costs are rising again, and pump prices are expected to start climbing, the government's top energy forecasting agency said on Wednesday. "With the near-month crude oil futures price rising from a level close to $50 per barrel recently to nearly $57 per barrel (on Tuesday), retail gasoline prices have seemingly bottomed," the federal Energy Information Administration said in its weekly review of the oil market. The national price for regular unleaded gasoline remained at $2.17 a gallon for the second week in a row after falling some 14 cents during the prior two-week period. The EIA had thought the average pump price would fall to near $2 a gallon by late January or early February following a sharp 16 percent decline in crude oil prices since the start of the year. However, oil prices jumped last week following Bush's call in his State of the Union speech for Congress to increase the size of the country's emergency petroleum stockpile and for the government to buy about 11 million barrels of oil this spring. With crude accounting for about half the cost of making gasoline, the EIA said the savings at the pump for drivers is likely over. Oil went even higher on Wednesday, closing above $58 a barrel at the New York Mercantile Exchange and putting more upward pressure on gasoline prices. The EIA said pump costs are also likely to go higher in the weeks ahead because Saudi Arabia plans to follow through on its pledge to cut oil production beginning Feb. 1 and other OPEC countries could reduce their output further. Cold winter weather in the Northeast means more heating oil use, which will affect crude oil prices, the EIA said. The agency also said U.S. gasoline inventories are currently "ample," but they should fluctuate from one end of the average range to the other as motor fuel demand picks up in February and March. "There is reason to believe that once retail gasoline prices begin rising, an upward trend could last for many weeks," the EIA said. There is some good news for drivers. Even if gasoline prices rise over an extended period, the EIA said it did not expect the average pump cost to "approach anything close" to $3 a gallon, as has been the case in each of the last two years. But the agency warned that could change if there is a major disruption in refinery or pipeline operations or with crude oil supplies.
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