Experts are split on where gas and oil prices go from here — on how much they'll go up, that is. "I wouldn't rule out the possibility...
NEW YORK — Experts are split on where gas and oil prices go from here — on how much they’ll go up, that is.
“I wouldn’t rule out the possibility that we could get to $4,” said Antoine Halff, an analyst at Newedge USA.
Other analysts are less certain. Fred Rozell, retail pricing director at the Oil Price Information Service, thinks gas prices will rise only another 10 cents to 20 cents nationally. That would mean they would peak near $4.15 a gallon in California, where prices are typically highest, and around $3.50 in New Jersey, where they’re typically lowest.
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On Tuesday, gas and oil prices pushed further into record high territory, with retail gas reaching a national average of $3.51 for the first time and crude nearing $120.
In the Seattle-Bellevue-Everett area Tuesday, AAA reported the average price for regular gas at $3.65 a gallon, up from $3.52 a month ago, making it possible not to see $4 — at least in the near future.
Gas prices are rising for many reasons, including oil’s record run. Light, sweet crude for May delivery rose to a new trading record of $119.90 before retreating to settle up $1.89 at a record $119.37 a barrel on the New York Mercantile Exchange.
Oil also rose on concerns about supply constraints overseas. A Royal Dutch Shell joint venture declared what’s known as force majeure on April and May oil delivery contracts from a 400,000-barrel-a-day Nigerian oil field due to a pipeline attack last week. The move protects the company from litigation if it fails to deliver on contractual obligations to buyers.
While gas prices are following oil futures higher, they’re also rising because supplies are falling. Refiners are in the process of switching over from making winter-grade gasoline to the more-expensive, less-polluting, form of the fuel they’re required to sell in summer. That’s pushing supplies down as producers try to sell off all of their winter gas.
Gasoline supplies are also being hurt by low profit margins. Refiners have to buy the crude they turn into fuel, but falling demand for gasoline has hurt their ability to raise gas prices as much as they would like.
While the average profit margin on gasoline hovers above $10, analysts say margins have gone negative in some parts of the country in recent weeks. In those cases, refiners were actually losing money on every gallon of gas they made. Many refiners have reacting by producing less gas.
“Very high crude prices can constrain gasoline supplies as it hurts the margins,” Halff said.