Gov't says gas prices to hit peak in May

As gasoline prices continue to creep upward, the government says the worst of the run-up that began in December might be over. But some outside analysts are skeptical.

Regular averaged $4.167 on Long Island Wednesday morning, according to the AAA, up 3 cents from a week earlier and 62 cents from December's low. The record Long Island average is $4.346, set July 8, 2008.

The U.S. Department of Energy forecast this week that prices will peak for the season sometime next month and that, for all of May, regular gasoline will average $4.01 a gallon nationally -- or about 9 cents above the current national average of $3.915 in the AAA's daily survey.

The reason: Crude oil prices have slipped from as much as $109 in February for the U.S. benchmark grade to $102.70 Wednesday. The price drop has been driven by several factors: strong supplies from increased U.S. production, Iran's agreement to talks over its nuclear development program, Friday's disappointing jobs report from the government, new concerns about the European debt crisis and a reduction in demand by China. Gasoline supplies are ample as well, while demand is off.

The department didn't forecast a peak price for next month but Neil Gamson, an economist there who helps prepare the forecast, said, "Based on what we see today and given world oil prices, we don't see prices going up much from where they are now."

The department forecast that prices this summer will average 24 cents a gallon higher than last summer -- about $3.95 a gallon nationally for regular.

Some experts think prices will peak later and higher, unless President Barack Obama releases oil from the strategic reserve, as he did in June. Stephen Schork, editor of The Schork Report, an energy newsletter, sees a peak in July at about 14 cents above Wednesday's average. Analyst Sander Cohan of Energy Security Analysis Inc. sees the peaking in June at about 35 cents above current levels. "There's still a lot of summer demand season to come," Cohan said.

Last year, Long Island's average peaked May 12 -- at $4.284 for regular -- and then gradually fell to $3.541 on Dec. 26.

But the government and private analysts agree that prices in the Northeast could spike further if a third refinery in the Philadelphia area that supplies this region closes. Its owner, Sunoco, is trying to sell it.

"If the Sunoco Philadelphia refinery closes," the energy department said, "price impacts are highly uncertain. If certain areas cannot be adequately supplied in the short term, prices can spike."

The three refineries account for about half the Northeast's refining capacity, according to the U.S. Energy Department. The closures mandate that gasoline be shipped here by already overtaxed pipelines and more expensive tankers.