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    Though it's almost summer and oil is spilling unchecked into the Gulf of Mexico, gas prices are down. (jeferonix, Flickr)

    by: Kevin Ransom | AOL Autos
     

    A wise man once said that the hardest thing in the world to predict was the future. To which we would add: “Especially gasoline prices.”

    Fuel prices have indeed been a moving target over the last couple of years. Now, summer is upon us, a season when gas price increases are as commonplace as beery backyard barbecues and melting ice cream cones. Many economists have been saying for months that as the economy began to recover, oil prices would increase, which would lead to a hike in the price of petrol in turn. Certain indicators in the last couple months suggest that the economy has indeed been recovering, slowly.

    Which brings us back to the folly of trying to predict the future price of gas. The conventional wisdom about a summer price hike was dramatically upset when the national average price per gallon dropped 16 cents from May 5 through May 26, from $2.93 to $2.77, according to AAA.

    Happily for motorists, this summer should be an atypical one when it comes time to fill up the tank, according to industry analysts. Indeed, barring any major upheaval – like a hurricane, or a war breaking out in a leading oil-producing nation, etc. – the average summer price will probably fluctuate between $2.60 and $2.80, according to those that make these sorts of predictions for a living. The key word, of course, is “probably.”

    “Now, if we wake up tomorrow and some military operation has erupted in North Korea, or if Iran is pot-boiling again, that would certainly change the calculus,” says Tom Kloza, chief oil analyst for Oil Price Information Service, based in New Jersey.

    John Felmy, chief economist for the American Petroleum Institute, concurs: “If there were to be a disruption on supplies due to unrest in certain countries, or, say, if the demand for fuel in China were to increase significantly, which mopped up a lot of the existing supplies, then that would cause prices to go back up.”

    As for the disastrous BP oil-well explosion -- and its otherwise unstoppable gusher of oil into the Gulf – that will not have an impact on gas prices any time soon, says Felmy. The well was mostly for experimental purposes and didn't have an impact on our daily consumption.
     
    From an environmental-impact perspective, the staggering amount of oil gushing from that well is indeed a catastrophe of epic proportions, “but it only represents a small percentage of all of the oil that is being pumped right now,” said Felmy.
     
    “And, remember, that oil wasn’t slated to be produced yet," said Felmy. "They were going to cap that well and then decide how and when to produce, refine and distribute that oil. So, in that respect, it won’t have any impact on the supply of oil or price of gasoline, not in any short-term scenario.”

    Kloza summarizes his summer gas-price forecast by offering up this slightly sardonic analogy: “You know, the New York Mets could win the World Series this year. And, the price of gas could increase to more than $3 a gallon this summer. But the likelihood of either happening is about the same.”

    So, what precipitated the recent price drop and upset the notion that price hikes are always to be expected come in summertime, when the weather is hot, and we’ve got cruisin’ on our minds? Kloza says that recent assumptions regarding fuel prices, as related to an economic recovery, were based on the economic ups and downs of the last two years. Since this was a period so fraught with financial turmoil, he thinks this was done in error and instead the last two years should have been regarded as outliers.

    “In ’08, the world lost its mind on just about everything, from the price of real estate to the price of grain to the price of oil,” he says. “We got disconnected from reality, which is why the price of gas spiked to more $4 a gallon that summer, and then dropped 75 percent by the end of the year.”

    And in 2009, the nation struggled to try and recover from a “super recession,” something the U.S. has never had to cope with during the modern era. “So, the markets just didn’t know how to behave when coming back from that abyss,” offers Kloza.

    Another factor, according to many analysts, is that supplies of gasoline have risen steadily in the two months prior to the price drop. In fact, as of April 30, the U.S. had squirreled away 225 million barrels of gasoline, a supply increase of about five percent over April 2009. Concurrent with that, demand had decreased, relative to previous estimates.

    “That, in turn, was partly due to the record amount of gasoline produced thus far in 2010,” says Felmy. “In March, we set an all-time record for gasoline production: 9.3 million barrels per day. And April was not far behind, with 9.1 million barrels per day,” he says.

    Thirdly, Europe’s escalating debt crisis cast some serious doubt about whether the global economic recovery was real, or at least whether the recovery would proceed at the rate that forecasters had assumed. That doubt prompted institutional investors to seek refuge in the U.S. dollar, relative to European currencies. When the value of the dollar increases, it almost always follows that oil prices drop.

    One key point to consider, though: The above prices are national averages. Consumers are paying more in certain states, like California, New York, Nevada, Illinois and Hawaii. That’s due to one of two factors, says Felmy, either higher taxes or because the state is a long distance from the “hub” of the nation’s oil-refining industry along the Gulf Coast.

    The cost of hauling fuel across the country can add many, many pennies to the retail price of fuel. “Hawaii, obviously, is a long way away, as is Alaska. And Alaska is also massive, which further adds to the transport costs. So the distribution costs to those states can really add up,” says Felmy.

    Taxes vary significantly across states. “Chicago, for example, has the highest in the country. There’s the gasoline tax, and state excise tax, and then federal tax on top of it,” says Felmy.

    Kozla shares a thesis that oil-industry analysts and traders frequently chew over: That some time this decade, or even in the next five years, we could be paying those summer 2008 prices again.

    “But I keep saying: ‘Not yet – and not this year,’” he says.

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    1 - 20 of 99 Comments
    justputinalong Jun 10, 2010 12:29 AM
    I think it's all ********, the price of gas is whatever the public will bare, nothing more and nothing less. We have oil wells all over the U.S. and they pump hard when the price is high and shut down when the price is low. We use less and the price comes down. And FYI, the deep water drilling by BP in the gulf was being capped when all hell broke loose and likely would never make it to our cars but would go to the highest bidder. Now it's ruining a lot of lives. Sucks, but that the way it works, money talk and Bulls** walks.
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    bilco1949 Jun 03, 2010 2:39 PM
    iiiobamaiii First of all, I cannot understand what you are saying. But, it has a anti-American tone to it. "U.S.A. steals from Iraq everyday." Things of that nature. If you are living in Our country, you live by Our rules, or, simply go home. The same would hold true if I (God forbid) should ever visit Iraq. "Your god, blah, blah, blah...." Just pack your towels, and get out of here. You are living here at our expense. Is it time for your terrorist cell meeting, yet?
    Report This
    iiiobamaiii Jun 03, 2010 2:21 PM
    we steal 1,000,000 Bareal....Not Gallon......each day.......noT each month or yr.......1.000.000 BAREAL(one million).......(each day)>>>>from Iraq......and it gets split between those countires that they have their soldier fighting in IRAQ....depend on how much money they spend there and how many soldier each one have there......40% comes to LUCKY US HERE(((((viva_usa))))....about 25% to British...they rest to those other samll countires in NATO......
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    iiiobamaiii Jun 03, 2010 2:15 PM
    gas price will not go up untill after the leakage is fixed......otherwise the politician and other top government croooooks...get sthe blame from people......now they are using the reserve gas ....once its fixed , then it will go up to make the different with no complain.....it is politic.....poeple.......c.mon......
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    iiiobamaiii Jun 03, 2010 2:11 PM
    we pay the price of what we are stolen from IRAQ everyday for the past 10 yrs......what else you expect from your god....good brings good....bad brings bad...period
    Report This
    ajdt3 Jun 03, 2010 2:09 PM
    Well with the American Public only getting 25% of the oil that is being spilled on American Shores why is it that the price of Gas and Oil keep rising?? We don't benifite from the Alaskian Pipe line either, who come, well most of that oil gose to Japan!! The oil companies have all the Washington Politicians in there pockets people so that is why we don't get any better pricing but higher?? The next big disaster is going to be the Pipe line has to be repaired or replaced?? It only had a life spam of 20 years, well wake up people it has been now over 30 years and it is still pumping for the Japs!! We get the short end of the stick no matter it be Oil, Gas, food, prices of cars, interest rates from banks, we just pay the bail outs for the rich so they don't lose a dime!!!! I feel so sorry for the rich I think I am going to start a fund for them so they don't have to do anything but enjoy life??? Yea Right!! People the life long politicians keep telling us how good we have it as they spend our tax dollars on everyone but the American people. Just ask any illigele, or new Arab coming into the country. they have more rights and get more from the government then WE THE PEOPLE!! Get rid of the lawyers in Washington and our State Houses and put the government back in control of the People and throw out the life long politician in Washington!!!!!!!!! These are the very people that think we are not able to make a decission?? The decissions that they have been making I don't think are to good as it only benifits the rich and people overseas?? Who put us into this World Market?? We didn't want it, who sent our jobs overseas, we didn'********* time we shouted for the roof tops of our discuss, with all politicians and lawyers (which are one and the same) and throw them all out of office and put in non lawyers in there place!! It took only one man to write a one page docutment and 50 men to sign it, it is called the Declaration of Independance!! Why dose it take 2,400 pages to make a law that know one wants or understand?? Think about people you have the power to hell with both parties, we the people should be making the decission not the politicians!!
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    momser007 Jun 03, 2010 2:02 PM
    because of the oil spill, oil companies are in big doo doo. the last thing they want is regulation and to lose their oil subsidies. americans are really outrageed at the spill. if they raise the price now, it would be the last straw. if a hurrican would have caused this disaster oil prices would be at 4.00 a gallon. oil prices will not go up until this spill is out of the news and that will be when they stop the flow.all oil leases are for inventory only to boost the price of their stock.
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    frearinnovations Jun 03, 2010 1:58 PM
    Reality Check ! .. Supply is High because Demand is Way way Down !. America and the Worlds Economy are in a Death Spiral.All while Nero is out playing gulf!
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    grovestar Jun 03, 2010 1:36 PM
    I call articles like this propaganda. It baffles me that a group of HEDGEFUNDERS can manipulate the price of fuel. The are some serious HOLES in regulations of oil distribution. Again the oil warlords payed the lobbiers to pay off the swing votes that make the laws that benefit themselves. Here's my take on what I've found out from propaganda in the media. The oil and minerals on American soil belongs to the American people. The oil in question mined from our soil is distributed on an open world market based on supply and demand. I call bullsh8t on that. But anyhow my point is this. That oil belongs to us and we should be able to vote on how it is marketed and where and how it benefits us as taxpayers. We have no say in haw much they oil companies pay to lease the mines,or any monitary payments to the American system. PLEASE READ THIS PART CAREFULLY AND TAKE ACTION. THE AMERICAN PEOPLE NEED A NEW LAW TO PROTECT OUR "PRECIOUS RESOURCES" FROM THE CURRENT SITUATION. MY LAW WOULD START LIKE THIS. ANY MINERALS OWNED BY THE AMERICAN PEOPLE THAT HAVE MONITARY VALUE TO ANY MARKET WILL BE CLEARLY DEFINED AND IDENTIFIED. PRIVATE COMPANIES OR OTHER COUNTRIES INTERESTED IN PURCHASING THE PRODUCT WILL FOLLOW A CLEARLY DEFINED PROCESS THAT ALLOWS THEM TO BECOME A DISTRIBUTOR OR DEALER FOR THE PRODUCT. HERE'S THE KICKER! ANY OF THIS PRODUCT MINED FROM AMERICAN SOIL MUST BE SOLD TO AMERICANS FIRST AT A STABLE PRICE ACCORDING TO OUR NATIONAL DEMAND. ONCE THE STOCKPILE FOR OUR USAGE HAS BEEN ESTABLISHED WITH AN ADDED IN CUSHIN FOR EMERGENCY, ONLY THEN WOULD THE PRODUCT BE OFFERED TO OUTSIDE MARKETS. I believe that if we took care of our own first to stabalize the economic impact of Price Gouging from oil related products. Everything we buy is associated with patrolium products in one way or another and therefore effected by oil traders. Folks, I just offered a suggestion as a PRO ACTIVE solution. Let's build off this outline and become the Ideal American lobbyers. I am "Grover Cleveland" grovestar@aol.com Next we can talk about the trillions of dollars a day we are losing because the banks we bailed out are dodging taxes on our transactions by "OFFSHORE BANKING". That newe law is simple, do buisness here and pay taxes here. PERIOD! Don't like that? Go somewhere else
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    delement Jun 03, 2010 1:15 PM
    "If a million gallons of oil, a day, are leaking out of this one well, why are we short in the first place? The Alaska pipeline was supposed to relieve us of foreign oil, why hasn't it? The oil field, the pipeline comes from, has enough oil to supply us for a lifetime, anyway. The newest discovery in Alaska is even larger." Are you serious?! Maybe if you did a little research, and simply studied global supply/demand, you'd answer your own question... You obviously have no clue as to what the GLOBAL appetite for petroleum is...China alone uses 8 million barrels/day and rising. T. Boone Pickens, an oilman, has stated that the maximum world oil production is at most 85 million barrels/day, which is about what the globe consumes right now. So we're right at the maximum, with no extra capacity for growth...ie. growing economies like China and India. We need to develop all of our alternatives, like yesterday...
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    juliegillri Jun 03, 2010 1:04 PM
    Not a word about the impending regulation of the speculators and market manipulators? They are the reason fuels spiked, and now that Congress is sending a strong signal that it will not be tolerated and a new law about to be passed, the writing's on the wall for them. That is ********* all about--the economics of supply and demand went out the window.
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    beatnikbanditle Jun 03, 2010 1:01 PM
    I think oil prices are going to tank right along with Obama's approval ratings.The day that oil hit $111 a barrel Sean Hannity's story about the Rev. Wright blew up. Oil prices dropped until Obama denounced his pastor. I call it the "Rev Wright Ripple". Oil prices in 2008 mirrored Obama's road to the whitehouse.Every setback,every leap forward were matched with a dip or spike in oil prices. Until Bush fixed the problem by lifting the offshore drilling ban,putting psychological pressure on oil prices driving them down to "market force" levels and subsequently saving the global economy.GW should have received the Nobel prize.
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    mrmichaelarata Jun 03, 2010 12:56 PM
    Gas here in Grand Saline, Texas only $2.34 a gallon! Be HAPPY!!!
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    oyevette Jun 03, 2010 12:47 PM
    1973. This is 2010. Look at us. End the use of antiquated oil as a source of energy. It's all been about spineless and corrupt governments caving to the lobbyists. It's so "messed" up that we will pollute the entire Gulf of Mexico and perhaps the east coast Florida beaches as well. All that oil should be backing up in South Texas, and Galveston Bay, clear up to Houston. Honestly. What's it going to take? Two- thirds of the commercials on tv are for autos that run on dirty, last century oil. It's surreal. We have plenty of other resources. Let's use them. President Obama, please rid this nation of the oil oligopoly. Nobody has had the backbone to do so since 1973. This is bigger than health and it always has been.
    Report This
    battlesbaby113 Jun 03, 2010 12:42 PM
    Gas prices here in Valdosta GA are 242-249 a gallon!! Im loving but really, how long is it going to last????
    Report This
    zilchll Jun 03, 2010 12:38 PM
    If a million gallons of oil, a day, are leaking out of this one well, why are we short in the first place? The Alaska pipeline was supposed to relieve us of foreign oil, why hasn't it? The oil field, the pipeline comes from, has enough oil to supply us for a lifetime, anyway. The newest discovery in Alaska is even larger. So isn't it obvious the oil companies control, pretty much the whole world and do as they please? I don't understand how everyone complains about oil companies and expects it to do any good, DUH! The so called government, owned by the oil companies, hauls them into congress for a Q&A session and chews them out strictly for show and then later, a party paid for by the oil companies, more so called campaign contributions are dished out. The press goes right along cause they are invited to the parties and get paid and even get to ride in AF-1 on trips all over the world. Oh, by the way, all the trips taken by air, all over the world, by congress and executive office, uses how much of the precious oil? We are the most powerful nation in the world so why do we have to go see anyone, they should come to us. We sure do give them enough of our taxpayer money, then they spit on us. We built all the foreign oil fields and made them rich and they spit on us. The oil companies are supposed to pay for the oil spill, they will, in campaign contributions, more trips around the world for government officials, state and federal. As for prices, do they raise them everytime something happens, not really, they raise them anytime they want, 5 cents, then 2 more cents after that, then drop it a penny or two and everyone goes nuts. HA! Then it goes down a dollar from three, whoopee. When the price at a service station goes up and no tanker has been there for 2 days or more? Come on, it still should be 50 cents or less, a gallon, suckers! But what do I know, I am not the all knowing, bought and paid for press, nor am I in the bought and paid for government, which makes them way smarter than anyone. AND, the government charges bunches of taxes on fuel, to fix roads that don't get fixed? More oil companiy contributions to government? Higher prices, means more tax money collected! Now I will be labeled a crazy person because I said this, but, hide and watch, holler and scream, see if anything changes. Get a grip people, it ain't gonna change. We have never needed foreign oil and never will. You people believe everything they tell you so take what they give you and shut up! Or, get rid of all of them and the current ones that want in, put the common, honest(if possible), working man back in charge. I do not mean the working man that goes so far in debt, just to maintain an image, he's one of them. Good luck with that because the greed and corruption is way too deep to stop it now.
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    oldf4drvr Jun 03, 2010 12:31 PM
    The article says that the BP blowout should not affect prices. Question - What if the Louisiana deep water unloading facility (LOOP) is affected by the oil spill? If I remember correctly, we import over a million barrels per day of crude through LOOP. The aftermath of Hurricane Katrina showed that the Gulf Coast refining problems can affect the entire East / Central United States.
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    a55amore Jun 03, 2010 12:29 PM
    The gas prices may be dropping in other area's, but in Brooklyn, NY they still average 2.93 to over 3.00 per gallon. Upstate New York, they average 2.68 to 2.83 per gallon. The stations are still gauging down here in Brooklyn.
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    pridenjoyiii Jun 03, 2010 12:17 PM
    Who knows why the gas prices are dropping in certain parts of the country. It has here but I am not driving any more than when they were around $4 per gallon nor will I ever drive more than I have been recently. I think it is all about speculation so don't trust a thing anyone says about the price of oil. I just keep figuring out ways of not driving my vehicle. It can be low one day and the next on its' way up again. Conserve folks. Just think $4 a gallon and you will be prepared for when it does go up.
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    bobamsterdam5 Jun 03, 2010 12:15 PM
    There is one sure way to bring down gas prices. We Buy Oil - THEY BUY WHEAT Let the price of each MATCH----- A Bussel of Wheat EQUALS A BARREL OF OIL.- Oil & gas would be a dime a barrel
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    What precipitated the recent gas price drop and upset the notion that price hikes are always to be expected come in summertime?
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