Gas-Price Rise Seen To Level Off

Gas prices are pumping up of late, hitting records all across the country. There are fears they may keep rising all summer, when vacation driving hits a peak. Tom Kloza, the chief analyst for the Oil Price Information Service, visits The Early Show to offer a look at the road ahead.

Nationwide, retail gasoline prices hit $1.71 a gallon on Tuesday, March 2, only about 3 cents a gallon below the all-time high for the country, which was last Labor Day weekend's $1.74 a gallon.

Kloza explains the increase to co-anchor Rene Syler. He says, "Number one, you had the price of crude probably $5 or $6 a barrel higher than it's been in most previous years, last year being the exception with the war. But secondly, the price of gasoline, because of not enough refining capacity in the United States, is trading at a huge, huge, huge differential versus the price of crude oil. So you've had the wholesale prices essentially going up since about November, about four months. They've gone up about 50 cents to 60 cents across the country."

Anger is probably the immediate reaction among consumers when they go to fill up. But Kloza says consumers are not being gouged.

He says, "This is really a culmination of what's happened with Clean Air regulations and people driving more. Despite the higher prices - you're talking about $2.25 on average in California right now - people are driving more. They're driving SUVs and demand is going up about 2 percent a year, while supply is essentially the same as it was two years ago. On a 20-year basis, we're using about 50 percent more gasoline than we did 20 years ago. Yet, we've got about 15 days left [in our] supply of gasoline."

The big question, though, for those gearing up for summer vacation is, are gas prices going to moderate? Or should we expect to pay possibly $3 a gallon at some point?

Kloza expects prices to level off. He says, "I would compare this year's gasoline prices to a camel. In most years, it's been a one-hump variety; this year, it's two. We're at the beginning of one hump and then moderate through the spring and summer. Interestingly, probably the summer will test the all-time highs or surpass the all-time highs toward the end of the summer. I don't expect to see a $3-a-gallon gas tank notice. You return your rental car non-filled in which case you're already paying those numbers."

The senior analyst for OPIS expects prices to through an average of $1.73-$1.75 average, breaking the record for the country in the next few days. He says, "The good news is the West Coast comes down in the next few weeks then moderates 10 or 15 cents lower in the next few months. Then, right around the time the politicians are getting together for the convention, we may go back to $2 and higher."

People can curb the damage done by buying fuel-efficient cars, carpooling and using public transportation.