Energy Dept. boosts outlook for oil and gas prices

The Associated Press
Tuesday, March 8, 2011; 1:29 PM

NEW YORK -- Pump prices will average $3.70 per gallon this spring and summer with a barrel of oil averaging $102 this year, the U.S. Department of Energy said Tuesday.

Conflict in the Middle East and fighting in Libya prompted government analysts to raise expectations for gasoline prices by 50 cents a gallon for the peak driving season in the Energy Information Administration's monthly Short-Term Energy Outlook. The EIA boosted its per-barrel oil estimate by $9 for the year.

EIA sees pump prices peaking at $3.75 a gallon in June. But its report says there is "significant uncertainty surrounding the forecast" and pump prices could spike above $4 this summer, which would threaten the all-time high of $4.11 a gallon reached in July 2008.

On Tuesday the national average for a gallon of regular hit $3.52, according to AAA, Oil Price Information Service and Wright Express. That's 40 cents higher than a month ago and 76 cents above a year ago. After settling at $105.44 a barrel on Monday, benchmark crude lost about 80 cents in Tuesday afternoon trading.

The Energy Department expects world oil markets to tighten over the next two years with the average oil price rising to $105 a barrel in 2012. It said uncertainty about oil production in North Africa and the Middle East, the world's largest oil-producing region, is a major factor.

The government also expects oil production lost from Libya to be covered by increased production in other OPEC countries. Saudi Arabia, the biggest OPEC contributor, has said it will cover any shortfall caused by strife in the region.

© 2011 The Associated Press