Retail gasoline prices pulled back slightly from record levels Tuesday and gave some consumers a small break, but a new government forecast said gas could reach as high as $4 a gallon during the summer driving season.
Oil futures prices, meanwhile, fell as the dollar stabilized, giving investors an opportunity to lock in profits from crude's recent rally.
Limiting the declines were developments in Iran, which announced plans to expand its uranium enrichment program and said it has tested key equipment, a move that raised the market's concerns about political conflict that could affect the country's oil exports.
In its monthly report on petroleum supplies and demand, the Energy Department's Energy Information Administration forecast that monthly average pump prices will peak near $3.60 a gallon in June, but could rise as high as $4 a gallon at times. That's a dime higher than the EIA's previous monthly average projection, and brings government forecasts closer to those of many analysts who expect gas prices to peak close to $4 a gallon.
The government also predicted high prices will cut demand for gasoline at the height of the summer. Gas consumption will fall about 0.4 percent during the peak summer months, and overall consumption of petroleum products will drop by 90,000 barrels a day this year, the EIA said. The agency previously said petroleum consumption would rise by 40,000 barrels a day.
High prices are already having an impact on demand, which has fallen since January.
On Tuesday, regular unleaded gas prices slipped slightly to a national average of $3.331 a gallon from Monday's record of $3.339, according to AAA and the Oil Price Information Service. Prices are 55 cents higher than a year ago.
In Michigan on Tuesday, the average price for a gallon of regular stood at $3.37 a gallon, up 56 cents from a year ago. In Metro Detroit, the average price Tuesday was $3.36, up 61 cents from a year ago.
Crude oil's rise above $100 earlier this year is the main reason gas prices have been rising. Crude futures rose to a trading record of $111.80 last month, and have since traded in a range between about $100 and $110.
Many analysts expect oil prices to rise higher in coming months, possibly above last month's records, as the Federal Reserve cuts interest rates later in the year. Lower rates tend to weaken the dollar.
High oil prices have also sent diesel prices higher. Diesel's national average price rose 1.3 cents to $4.02 a gallon on Tuesday, AAA said.
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