Gas falls 5 cents, more dips foreseen

Gasoline prices fell another 5.5 cents on Long Island in the past week to an average of $4.023 Wednesday for regular. Some analysts said prices will keep dropping in coming weeks, despite OPEC's failure Wednesday to agree on higher production levels.

Although demand nationally recovered last week as good weather and declining prices encouraged driving, the federal government reported Wednesday that gasoline supplies rose by about 2.2 million barrels, or 1 percent, last week from the previous week as refineries produced more.

The inaction by OPEC ministers meeting in Vienna came despite concerns from the United States and other nations that high oil prices were hurting economic growth. It was the first failure by the 12-nation cartel, which controls 40 percent of the world's oil, to reach a production agreement in 20 years, according to Bloomberg News, and it sent a shiver through the oil futures market.

Ministers rejected a proposal by Saudi Arabia, Kuwait, Qatar and the United Arab Emirates to boost output by 1.5 million barrels a day from the current 28.8 million. The increase would have been expected to lower prices. Ministers at the meeting told the wire services that Libya, Angola, Ecuador, Algeria, Iran and Venezuela were opposed to an increase.

But analyst Andy Lipow of Houston-based Lipow Oil Associates, a consulting firm, notes that OPEC members routinely exceed quotas and that only Saudi Arabia and Kuwait have much spare capacity, which Saudi Arabia at least is already tapping. "I wouldn't particularly worry about it," said Lipow. He noted also that as the day progressed, oil futures pared earlier gains so that U.S. benchmark crude closed up $1.65 to $100.74 -- $1.15 below its intraday high.

And he noted that gasoline futures fell Wednesday, by two-tenths of a percent. "I think the price at the pump can decline another 10 cents with oil remaining where it is right now," he said. John Kilduff, a partner at Again Capital Llc, an energy hedge fund based in Suffern, agrees with that picture. "Nothing has changed as a result of this" OPEC inaction, he said. "Even if they had raised quotas, they were just going to be legitimizing current production." He thinks motorists can expect more than a dime's relief. "There's still a good 20 to 25 cents at the pump in my view that has not flowed through yet," he said.

Crude oil, which peaked April 29 at about $114 a barrel for the U.S. benchmark grade, has fallen since then to about $100 a barrel. Gasoline locally has fallen by 26.1 cents a gallon from its recent peak average May 12 of $4.284 for regular, according to the AAA. The May 12 peak was just 6.2 cents shy of the record average of $4.346 a gallon, set July 8, 2008.

In a short-term outlook published Tuesday, the U.S. Department of Energy's Energy Information Administration forecast stable gasoline prices for the rest of the summer.

MasterCard Advisors said Tuesday that American drivers purchased slightly more gasoline last week than a year earlier, about 64.4 million barrels, the first year-over-year increase since mid-April.

With Bloomberg and ReutersGALLON OF GASOLINE

$4.023

Yesterday

$4.078

Month ago

$2.971

Year ago