- The Washington Times - Wednesday, November 1, 2006

Happy holidays are ahead for the motoring public.

A warm-winter forecast and declining crude oil prices are making analysts optimistic that many Americans will see $2-a-gallon gas by Thanksgiving, despite OPEC’s promise to cut production by 1.2 million barrels per day.

“We believe that in the next couple of weeks, the national gasoline price will average at $2.05 per gallon,” said John Townsend, a spokesman for AAA Mid-Atlantic.

AAA based its prediction on the premise that “the retail price of oil is generally 60 cents per gallon more than the wholesale price,” Mr. Townsend said.

The wholesale price of gasoline closed at $1.448 yesterday on the New York Mercantile Exchange.

Washington-area motorists now pay $2.15 per gallon on average, but gas prices have dropped to less than $2 in some spots. Five area gas stations advertised regular unleaded gasoline at $2 or less yesterday, according to gas price Web site www.washingtondcgasprices .com.

Gulf Coast residents are enjoying the lowest retail gas prices in the country, paying a regional average of $2.10 per gallon, according to the U.S. Energy Information Administration (EIA). The West Coast has the highest prices, at $2.41 per gallon, it said.

Several factors are contributing to the plunging pump prices:

• The National Oceanic and Atmospheric Administration is expecting warmer-than-average temperatures from December through February.

“If it’s a milder winter than predicted, the demand for home heating oil should decline,” Mr. Townsend said.

• U.S. petroleum inventories have remained above the five-year average, an OPEC spokesman said yesterday. If inventory levels stay high, gasoline prices could keep falling, AAA analysts said.

The EIA will release its weekly report on petroleum inventories today.

• Crude oil prices have not increased sharply after the recent decision by the Organization of Petroleum Exporting Countries to cut oil production.

OPEC voted last month to cut production by 1.2 million barrels per day starting today, but oil speculators wonder whether OPEC members will follow through with the plan.

“A lot of traders don’t think that OPEC will make the cut because they think prices will continue to fluctuate,” Mr. Townsend said.

Speculators were surprised when oil prices hit a six-month low of $56.82 on Oct. 20. The price of crude then rose to $60.36 Thursday before sliding to $58.73 by yesterday’s close.

“The OPEC countries will definitely cut their production,” Omar Farouk Ibrahim, OPEC’s head of public relations, said in a telephone interview yesterday from the organization’s headquarters in Vienna, Austria. The next OPEC meeting, scheduled for Dec. 14 in Nigeria, will focus on the market’s reaction to the production cut, he said.

“For now, we don’t have any predictions about how the market will react,” Mr. Ibrahim said. “But we do know that the market is stabilizing.”

“Even if they follow through with the production cut, it’s still only a 4 percent decrease in the total output,” Mr. Townsend said. “The pump prices we’re enjoying now are much better than the prices from last year, and so are the crude oil prices.”

“Even if the prices decline at a penny a day, it won’t be long until we see a regional average of $2 per gallon,” he said.

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