USA TODAY International Edition
Gasoline prices likely to rise
As fears grow over Syria, forecasters predict jump of 10 cents a gallon.
That September drop you were expecting for gasoline prices? Don’t hold your breath.
Gas averages $ 3.55 a gallon nationally, down from $ 3.63 a month ago.
Most analysts had expected a drop to about $ 3.40 by early fall as seasonal demand slumped following the summer driving season.
Not now. Some forecasters predict a short- term rise of up to 10 cents a gallon. Oil prices and gas futures are soaring on growing fears that if the U. S. military strikes Syria for using chemical weapons on civilians, Mideast oil supplies may be disrupted.
Domestic crude for October delivery topped $ 112 a barrel early Wednesday on the New York Mercantile Exchange, a two- year high. It settled at about $ 110. Benchmark Brent crude, up 1.5% in London, settled near $ 116, a six- month high.
U. S. wholesale gas prices — measured by September futures contract trading — climbed nearly 2% to about $ 3.09 a gallon, the fifth gain in six trading sessions. Consumers typically pay about 60 cents to 75 cents more per gallon at the pump.
“In some portions of the country, those increases are translating into a few bumps higher, and in other areas, the slow drift to lower ( pump prices) has been put in limbo,” says Tom Kloza, chief oil analyst at price tracker GasBuddy. com. “Bottom line, we’ll be paying perhaps in the low $ 3.60s this weekend, and God willing, the last 120 days of the year should see prices at or below those levels, once crude calms down,” he says.
Syria isn’t a major oil producer — its output is less than 100,000 barrels a day, vs. about 400,000 before its civil war started two years ago. But oil prices have been rising since July, when political upheaval in Egypt sparked concerns about access to shipping through the Suez Canal.
Some industry observers, such as Société Générale oil analyst Michael Wittner, suggest rising tensions could cause oil to briefly rise to $ 150 a barrel if the Syrian conflict spills over to major producers and causes larger supply disruptions. Crude last approached those levels in July 2008, when it hit a record $ 145 a barrel.
Still, Wittner says any jump would be short- lived because rising prices would inevitably lead to a demand slowdown, driving prices lower. Some major producers, namely Saudi Arabia, are willing to pump more oil during a supply disruption to help keep price increases under control and contain economic damage.
Kloza doesn’t see $ 150 a barrel, given weakening U. S. demand and falling prices of ethanol, which makes up 10% of most domestic motor fuels.
“Under most scenarios — but perhaps not the scenarios proffered by banks or hedge funds with plenty to gain from price escalation — I believe $ 115 ( to) $ 120 a barrel is probably a ceiling,” Kloza says.