Less pain at the gas pump forecast for summer

SHARE Less pain at the gas pump forecast for summer

Gasoline prices at the BP station, 35th Street and King Drive, Chicago, as average gas prices reached a record high in the Chicago area on Monday, March 26, 2012. | John H. White~Sun-Times

NEW YORK – The government says gasoline will be cheaper this summer than previously expected thanks to a drop in the price of oil.

The Energy Department says drivers should pay an average of $3.79 per gallon at the pump from April through September. That’s down 16 cents from last month’s outlook and not that dramatic an increase from last summer’s average of $3.71 per gallon.

This month’s forecast is a reversal from previous warnings of a sharp rise in gasoline prices. The government had said last month that gasoline prices in May could jump above a monthly average of $4.01 per gallon.

Oil prices have dropped about $7 per barrel since April 2.

The national average for gasoline has declined 17 cents since early April to $3.76 per gallon on Tuesday.

In the Chicago metropolitan area, the average price of unleaded regular gas was $4.18 a gallon Tuesday, also down 17 cents from a month ago, according to AAA.

Gasoline prices have fallen as oil prices have dropped. The price of oil fell 2 percent Tuesday, extending a weeklong decline, as signs of global economic weakness raised concerns about energy demand.

Oil has fallen every day since May 1. The price of benchmark U.S. crude has dropped by 6.7 percent in that time, while Brent crude has declined 5.4 percent.

On Tuesday, benchmark U.S. crude lost $1.94, or 2 percent, to $96 per barrel in New York. Brent crude lost $1.88, or 1.7 percent, to $111.28 per barrel in London.

Prices have declined on disappointing jobs numbers in the U.S. and recent elections in France and Greece that resulted in uncertainties about Europe’s efforts to solve its debt crisis.

And Saudi Arabia, the world’s largest oil exporter, has been increasing production in an effort to rein in this year’s oil price rise. The Saudis will lose money as oil prices fall, but its oil ministers are more concerned with keeping the global economy from falling back into recession. A recession could force oil prices to plummet, as they did at the end of 2008, which would be much more devastating for the Saudis and other oil producers.

Increased Saudi supplies mixed with growing concerns about the world economy should push oil prices lower in coming months, said Michael Lynch, president of Strategic Energy & Economic Research. Lynch expects benchmark crude to drop to $90 per barrel by Labor Day.

Contributing: Francine Knowles

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