Gasoline Prices Won't Be as High This Summer as in 2006, Government Says

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Motorists can expect higher pump prices in the months ahead, but gasoline will cost less on average than last summer and supplies will be plentiful, the government said on Tuesday.

The national price for regular unleaded gasoline this summer is expected to average $2.81 a gallon, down 3 cents from last summer, and reach a monthly peak of $2.87 in May, the federal Energy Information Administration said.

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The EIA's summer forecast runs from April through September, typically the biggest demand period for motor fuels in the United States.

The average pump price already hit $2.80 a gallon this week. But gasoline costs are much higher in certain areas of the country, with Californians paying an average $3.25.

In its annual summer forecast, the Energy Department's analytical arm said gasoline demand this summer will be up 1.2 percent to 9.5 million barrels a day and motor fuel production will be 1.1 percent higher at 8.6 million barrels a day.

Gasoline imports will help close the gap between supply and demand, with shipments to the U.S. market averaging 1.1 million barrels a day this summer, the EIA said.

"I think that we will see that supply will meet the demands of the driving season that is upcoming this summer," U.S. Secretary Sam Bodman told reporters on Tuesday shortly before EIA released its summer forecast.

However, the EIA warned that growing demand for imported gasoline by OPEC members Iran, Nigeria and Venezuela "could constrain the availability" of motor fuel shipments to the United States this summer.

While the three countries have huge crude oil reserves, they have limited refining capacity and their governments subsidize gasoline prices for citizens, which increases fuel demand.

Bodman said high crude oil prices and U.S. refinery outages have "added to uncertainties in the marketplace."

Traders are closely watching gasoline supplies in the United States prior to the peak summer driving season. Motor fuel inventories have dropped nearly 10 percent since early February amid oil refinery outages.

Still, the EIA said U.S. gasoline inventories hit 205.1 million barrels at the April 1 start of the summer driving season, down 4.4 million barrels from a year earlier but within the prior five-year average.

Unlike last summer when refiners had problems switching over to mixing ethanol with gasoline, more U.S. ethanol plants have come online, boosting supply by close to 28 percent.

U.S. ethanol production this summer is forecast to average 399,000 barrels a day, up from 313,000 barrels a day last summer, the EIA said.

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