NEW YORK -— Retail gas prices will peak near $3.60 a gallon in June, but prices at such lofty levels will make many Americans think twice about hitting the road this summer, the Energy Department said Tuesday.
High prices and a weak economy are expected to cut demand for gasoline by about 0.4 percent during the peak summer driving season, the department's Energy Information Administration said in a monthly report on petroleum supplies and demand. Overall consumption of petroleum products will drop by 90,000 barrels a day this year. Previously, the EIA had projected petroleum consumption would rise by 40,000 barrels a day.
The government previously estimated gas prices would peak near $3.50 a gallon. Many analysts predict prices will peak much higher than that.
On Tuesday, gas prices slipped slightly to a national average of $3.331 a gallon from Monday's record of $3.339, according to AAA and the Oil Price Information Service. Prices are 55 cents higher than a year ago.
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Crude oil prices are the biggest reason gas prices are rising, the EIA said. Oil is now expected to average $101 a barrel this year, up from the EIA's previous projection of $94. Next year, the EIA expects oil to average $92.50 a barrel, up from a previous projection of $86.
"The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices," the EIA report said. "The flow of investment money into commodities has contributed to crude oil price volatility."
Indeed, the EIA acknowledged "significant uncertainty" in its oil price projections, noting that unexpected supply disruptions due to conflict in oil-producing nations, unusual weather or refinery outages could send prices spiraling sharply higher.
"Prices can fall as rapidly under a different set of circumstances, such as easing of geopolitical tensions or further weakening of U.S. and world economic growth," the EIA's report said.
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