US Gas Prices Won't Drop Until October

By Roland Li | August 13 2012 11:19 AM

Gasoline production issues and tensions between Iran and Israel have sent U.S. gasoline prices above $4 per gallon in some cities, and prices likely won't fall until October, according to gasoline analysts.

Reuters

The cost of living in the U.S. increased at a slower pace in March.
REUTERS

Gasoline production issues and tensions between Iran and Israel have sent U.S. gasoline prices above $4 per gallon in some cities, and prices likely won't fall until October, according to gasoline analysts.

Crude oil rose close to $94 per barrel Monday on the New York Mercantile Exchange, before paring those gains slightly. Brent crude rose to $114.51 on the ICE futures exchange in London in the early afternoon, near a three-month high. The increases will likely affect consumers in the U.S.

"Crude oil always has an impact on the price of the pump," said Gregg Laskoski, an analyst with GasBuddy.com, a petroleum data firm. "There's simply no way we can expect the price at the pump to come down" in the near term.

Investors continue to fear a conflict between Iran and Israel over the Iranian nuclear program, which would tighten production. Israel's Deputy Foreign Minister, Danny Ayalon, said Sunday on Israel Radio that the United Nations should declare that Iran talks "have failed" and "all options are on the table." The European Union has already enacted sanctions against Iran, which has threatened to respond by blocking the Strait of Hormuz, a waterway that controls around a fifth of the world's oil.

In addition, U.S. production in the Midwest has been diminished by recent incidents. A pipeline owned by Enbridge Energy Partners LP (NYSE: EES) ruptured on July 27, discharging 50,400 gallons of crude oil. Other refineries in Illinois and Indiana have also closed because of equipment problems.

Nationwide, gas prices have risen five cents over the past week and 25 cents in the past month to around $3.67 per gallon, according to GasBuddy. Chicago had the highest average price of $4.22 per gallon on Monday, while El Pas, Texas, had the lowest price of $3.23, according to its data.

Relief is expected after Labor Day, as fewer Americans travel, lessening demand. As the weather cools, manufacturers can also switch to a cheaper "winter blend" of fuel.

"Historically, we've seen gasoline at their lowest at the fourth quarter of the year," said Laskoski. "We will probably see prices plateau and then come down in October."

But if Iran and Israel go to war, prices could spike.