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High gas prices could be here to stay By Sue Kirchhoff and James R. Healey, USA TODAY
No breaks are in the offing for motorists weary of high gasoline prices: The government now forecasts an average gas price of $2.25 a gallon through September.
That's 8 cents a gallon more than the Energy Information Administration forecast last month, and about 35 cents more than the average a year ago. And the EIA says crude oil prices will stay high enough that gas will average about $2.20 all next year.
Meanwhile, gas prices continue to set records. Motorists' club AAA's daily price survey shows the national average for regular-grade unleaded gasoline at a record $2.320 Tuesday, up a strong 3 cents a gallon from Monday's record. AAA's daily survey pegs diesel at $2.460, up another penny overnight.
Oil prices surged nearly $2 Tuesday to close above $60 again on fears that Tropical Storm Emily would become a hurricane and threaten U.S. oil production in the Gulf of Mexico. Crude prices settled at $60.62, up $1.70 on the New York Mercantile Exchange. The EIA also raised its oil price forecast for the third quarter to $59 a barrel, up $6 from its previous forecast.
Crude prices fell back a bit Wednesday, but gasoline prices could go higher if fuel demand picks up in late summer and refiners have already switched to making heating oil for the upcoming autumn and winter, the Energy Information Administration said.
U.S. gasoline demand the past four weeks has averaged 9.4 million barrels a day, up 2.3% from the same period last year, the Energy Department's analytical arm said.
High energy prices are taking a toll on businesses, with transportation costs rising 23% in the food, beverage and consumer products industry in the past three years, according to a survey to be released today.
The study by IBM Business Consulting Services and the Grocery Manufacturers Association, which was conducted in late 2004, found transportation costs have risen to an average of $1.69 per mile and now account for 62% of all logistics costs, or 6% of gross revenue.
The survey, released every three years, covers 32 firms — 86% in the food and beverage industry and 14% that make or sell health or beauty products. About half the companies, which include General Mills, ConAgra Foods and Procter & Gamble, had annual revenue of $1 billion or more. Energy prices have risen sharply since the companies were surveyed in late 2004.
"Margin pressures are severe," says Karen Butner, associate partner at the IBM Institute.
Truckers also are feeling the pinch of higher fuel prices and, in some cases, a shift by customers to rail shipping.
Chattanooga, Tenn.-based Covenant Transport in late June reduced its earnings guidance, saying it had been hit by lower-than-expected demand and higher costs for drivers and fuel. The firm said higher fuel costs, without accounting for fuel surcharge collections, will hit earnings by 10 cents per share compared with expectations.
The survey says consumer product firms were shifting shipping options, increasingly sending only full, rather than partially loaded trucks onto the road.
Contributing: Reuters
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