The regular-grade gasoline prices are expected to stay at an average record of US$ 3.66 per gallon this summer or could rise to US$ 3.73 per gallon in the US, says EIA.

The Energy Information Administration (EIA) said that the regular grade gasoline is anticipated to post an average value of record US$ 3.66 per gallon this summer and could reach US$ 3.73 per gallon by June 2008, as reported by REUTERS.

EIA predicted that during 2008, pump prices are anticipated to average US$ 3.52 per gallon, or 71 cents higher than the annual average price last year. Diesel prices are likely to stay at an average of US$ 3.94 per gallon, significantly higher than US$ 2.88 per gallon in 2007.

Oil and other essential commodities prices usually see an upward trend when dollar falls and are considered as hedge against inflation. In view of extended decline in dollar value, speculative investment is made, and consequently, petrol prices increased. Moreover, fall in the value of dollar against other currencies has attracted investors who consider oil as a barrier against inflation. Moreover, weakening of dollar has made oil cheaper to overseas investors. After accounting all these factors, EIA predicted high prices for gasoline in June 2008.

Furthermore, rising demand for oil in China, Brazil, India, Russia and the Middle East to fulfill oil need of their population, industries and transportation will also increase the prices of gasoline. Hence, major oil and gas suppliers have diverted their supplies to these countries; as a result, supply to the rest of the world has gone down, leading to high oil prices.

In addition, the investors are heavily buying on pure momentum with a hope that prices will increase in future irrespective of the negative news, data or dollar movements. Therefore, the price of oil and gas will further increase in future.

A Senior Research Analyst at RNCOS, “Depreciation in dollar against other currencies and selective investment are fueling the fuel prices, particularly gasoline in the US. To tackle this problem, the government needs to take some bold decisions like offering subsidies to oil refiners. This will help in reducing the production cost, which in turn, will help to control the high fuel prices in the country.”

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