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NEW YORK -- U.S. drivers will need to budget more to fill up their cars in the coming weeks. Yesterday the federal government predicted that the average price for a gallon of gasoline will average $3.49 in the third quarter of the year, up 10 cents from its July forecast, reports Bloomberg Businessweek.
The Energy Department's Energy Information Administration (EIA) stated in its monthly Short-Term Energy Outlook that rising crude oil prices will cause the higher gasoline prices. Benchmark U.S. crude trading is up $14 since the end of June, prompting an average gallon of fuel to rise from $3.35 a gallon to $3.63 per gallon during the same time.
The nationwide drought affecting this year's corn crop, which has cut ethanol production, is also a factor. The EIA reduced its outlook for annual production of ethanol by half a billion gallons to 13.3 billion, according to the report.
Natural gas prices will likely remain low at an average of $2.67 per 1,000 cubic feet for the rest of the year, down from an average of 44 per 1,000 cubic feet a year ago. However, even natural gas prices rose to $2.95 per 1,000 cubic feet last month, up 49 cents from June.
"While abundant supplies have kept prices relatively low, a hot summer and associated increases in demand for natural gas for power generation contributed to the increase in prices in July," noted the EIA report.
Meanwhile, current gasoline prices have risen thirty cents over the last five weeks, according to a CNN Money report. Data from AAA shows that the nationwide average of $3.63 cents per gallon is midway between this year's April 5 high point of $3.94 and the low of $3.33 just over a month ago.
Tom Kloza, chief oil analyst at the Oil Price Information Service, predicted that this weekend's gasoline prices will be higher than they were one year ago. Refining and transportation problems in the Midwest and West coast have also contributed to rising prices, said Kloza. California gas futures jumped 30 cents per gallon on Tuesday following an immense fire at a Chevron refinery in the state.
Kloza added that he expects gas prices to increase for the next couple of weeks, but that they will likely not approach $4 per gallon, the point at which many economists believe consumers seriously cut back their spending on other items. Prices should drop after Labor Day if the weather does not intervene.
"The one caveat is tropical storm season," Kloza said. "If [forecast] cones start to shadow the Gulf Coast, you'll see rallies."