The Center for Global Energy Studies predicts that gas prices will reach $4 for a gallon of regular gasoline before the end of the year, Bloomberg News reports.
Luis Giusti, a CGES board member, said the U.S. has yet to feel the pinch from closed refineries damaged by the most disruptive hurricane season in history for the oil industry. Hurricanes Katrina and Rita idled as much as 29 percent of U.S. refining capacity, cutting gasoline stockpiles to less than 23 days of consumption, close to the all-time low in 2003. About 18 percent of the nation's refining capacity remains closed.
Giusti also said that European imports will wane, further tightening supply.
Another analyst agrees. "We're going to need very high gasoline prices because we will be in a critical situation until we manage to replenish supplies," Francisco Blanch, a senior energy strategist at Merrill Lynch & Co. in London, said in the Bloomberg report. "I don't think demand is softening. U.S. consumers will be able to adapt to higher prices."
Others disagree. Peter Beutel, an energy consultant and president of Cameron Hanover Inc. in New Canaan, Conn., last week said the United States will sink into recession by mid-2006 because of fuel prices. This will cause demand to drop.
The average price for a gallon of regular gasoline is up 53 percent from a year ago and is close to an inflation-adjusted peak of $3.14 a gallon in 1981.