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Look for Gas to Fall to $2.70 a Gallon This Summer, Analysts Say

Wednesday, 21 Mar 2007 | 1:00 PM ET
CNBC.com

Stephen Schork, editor of The Schork Report, told CNBC’s “Morning Call” that he expects gasoline prices to decline by summer to a nationwide average of about $2.70 a gallon.

He said gasoline supplies always decline at this time of year as refiners build their supply of crude oil to prepare for the summer driving season. The drop in gasoline supplies creates a temporary spike in prices.

“There’s nothing new here,” Schork said Wednesday. “Gasoline supplies draw down because refiners are now in the maintenance season. They are retooling and shutting down units so they can start the blend for summer-grade gasoline at the end of April.”

He said gasoline entered its usual pre-season rally about five weeks early this year.

“You’re seeing a lot of that angst that normally accompanies a pre-season market priced in now,” Schork said. “By the time we get to the summer...the gasoline will be there and the price will come down.”

Vincent DeVito, an attorney for Pepper Hamilton and former acting assistant secretary of energy, said oil is now a national security issue and the price now includes a “fear premium.”

Gas Price Break?
Discussing whether a break from high oil and gas prices is anywhere on the horizon, with Stephen Schork, Schork Report editor; Vincent DeVito, former acting assistant secretary of energy; and CNBC's Michelle Caruso-Cabrera

He said Russia has joined the European Union in trying to rein in Iran’s nuclear ambitions. But strong demand in India and China boost prices.

“I don’t see a big run up (in price) unless there’s a catastrophic supply disruption,” DeVito said. “For instance, the only time we hit $3 a gallon at the pump -– keeping in mind (gas) is $3 now in California –- was in the aftermath of (Hurricane) Katrina.”

He said the U.S. Energy Information Administration expects the price of gasoline to average $2.70 a gallon at the pump this summer. Both analysts said the governmental agency has a good track record and agreed with the estimate.

A barrel of oil recently fetched $59.30 on the New York Mercantile Exchange, up five cents. The price peaked last July at $78.40.