High gas prices are here to stay, expert says

The projected price of a gallon of regular gasoline in 2009 is near the $4 mark.

WASHINGTON (AP) — Gasoline prices should peak at $4.15 a gallon this summer, the government says — finally an encouraging word for motorists who might be thinking the cost of a fill-up will just keep climbing.

But wait: The predicted relief is pretty modest. Prices at the pump are likely to stay around $4 a gallon much of next year, according to Wednesday’s projections by the Energy Department’s statistical agency.

Oh, and the government tends to err on the optimistic side.

Guy Caruso, head of the federal Energy Information Administration, delivered the sober news at a congressional hearing on energy prices and the future of oil.

Even as he spoke, oil prices jumped again, edging for a time above $138 a barrel and putting yet more upward pressure on gasoline prices. By the end of the day, the market seemed ready to set new records above $140 a barrel.

A drop in gasoline inventories, concerns about hurricanes that could disrupt Gulf of Mexico supplies, and, most important, the high oil prices all have contributed to a belief that the upward spiral of gasoline costs will continue at least for a few months, according to Caruso as well as private energy experts.

Motorists are paying $4.05 a gallon on average nationwide, and considerably more in some parts of the country, according to a survey of gas stations by AAA and the Oil Price Information Service. That’s an increase of nearly $1 a gallon since January.

And little relief is in sight.

Prices are likely to remain close to or above $4 for the rest of the year and average $3.92 a gallon in 2009, the Energy Department agency forecast.

Crude oil prices are expected to average $126 a barrel in 2009, or $4 a barrel higher than this year, as oil supplies and demand will remain tight, Caruso told the House Select Committee on Energy Independence and Global Warming.

“The consensus view,” said Rep. Edward Markey, D-Mass., the committee’s chairman, “is that oil above $100 a barrel is going to be with us for some time.”

The Energy Department’s statistical agency projects oil prices declining to $86 a barrel in 2010 but then increasing to $107 by 2015. Markey said he doubted those numbers and noted that EIA projections in the past have been overly optimistic when it comes to energy prices.

Predicting future oil and gasoline prices is highly uncertain with the volatile global oil markets, Caruso acknowledged.

His agency bases its gasoline projections on assumptions of future oil prices, expectations of demand and economic trends. It has revised its figures several times since last fall — not having anticipated the huge surge in global oil costs.

“They usually dramatically underestimate the cost,” said Eli Hopson of the Union of Concerned Scientists, which has examined annual EIA price projections going back to 2003. Each year the average price predictions were understated by 36 to 80 cents a gallon, said Hopson.

A panel of energy experts, meanwhile, told the House hearing that people shouldn’t expect any quick fixes to the country’s energy problems.

They said one answer is more conservation and a shift to alternative fuels — transitions that would take time. Caruso told the lawmakers that new auto fuel economy requirements and the increased use of ethanol and other alternative fuels are expected to produce “a substantial reduction” in oil use and oil imports over the next two decades.

There’s “no short-term fix, no panacea,” said Karen Harbert, executive vice president of Institute for 21st Century Energy, a group affiliated with the U.S. Chamber of Commerce.