Gas Prices Expected to Go Down Near Memorial Day

The record-high prices at the nation's gas pumps should start going down around Memorial Day -- even in especially hard-hit California and the Midwest, a top federal energy official said.

Prices may rise another nickel a gallon over the next two weeks, but unless new problems develop, they will begin falling, John Cook, director of the Energy Information Administration's petroleum division, told a House Energy subcommittee on Tuesday.

Refineries are winding up maintenance and increasing production, allowing supplies to creep up. Wholesale prices have dropped in the last two weeks, foreshadowing retail drops that lag two to four weeks behind, Cook said.

The news comes just as Americans are about to kick off the summer driving and vacationing season.

Gas prices hit a record high Tuesday, averaging $1.72 a gallon nationwide, according to AAA. Drivers in the Midwest -- especially Chicago -- are getting the worst of it, followed closely by those in California. The average price in Chicago on Tuesday was $2.08 a gallon.

The cycle appears similar to last year, when gas went well above $2 a gallon in June in Midwestern cities like Chicago, Milwaukee and Detroit, then dropped.

Cook dismissed recent talk of possible $3-a-gallon gas. Even if everything goes wrong in the nation's gasoline supply and distribution system this summer, prices won't go that high, he said.

"We aren't going to see $3-a-gallon gasoline anywhere this year," he said.

The factors to blame for this year's increases are familiar, Cook said. They include a tight crude oil market, lower gas inventories than last year, a patchwork of different, cleaner-burning gasoline blends required in many smoggy cities, and limits on refining capacity.

The problem is especially acute in the Midwest and West because of special requirements placed on "reformulated" gasoline sold there in summer.

In addition, recent fires at Tosco refineries in Los Angeles and Wood River, Ill., threatened supplies and helped prices surge. The Chicago market has been further squeezed by the closing of the Premcor Inc. refinery in Blue Island.

Cook emphasized that inventories remain tighter than normal for this time of year, leaving the nation vulnerable if a refinery goes down or a pipeline breaks. "Today little cushion exists to absorb changing conditions," he said.

Midwestern inventories are particularly low, ending last week 10 percent below their five-year average, he said.

Various energy users -- a national retailer, a farm fertilizer manufacturer, the American Association of Retired Persons and others -- told lawmakers they are hurting from high fuel costs, for electricity and natural gas as well as gasoline. The situation is cutting into business profitability, contributing to higher product prices for consumers and endangering farmers, they said.

"Motorists by the millions are suffering massive sticker shock every time they pull in to fill up," said Lon Anderson, public affairs director for AAA Mid-Atlantic. "We all know that over the long term, high fuel prices will literally fuel higher costs for virtually everything else from food to clothes to services and thus, fuel inflation."

The hearing was held as Democrats and Republicans debate how to chart the nation's energy future. Congressional Democrats unveiled an energy blueprint Tuesday meant to draw a contrast with a plan expected to be released Thursday by the White House.