Government raises forecast for oil, gas prices

NEW YORK (AP) ? The government said Tuesday that it expects the price Americans pay for gasoline to average $3.49 a gallon in the third quarter. That's an increase of 10 cents a gallon from its July forecast.

The Energy Department's Energy Information Administration said in its monthly Short-Term Energy Outlook that gasoline prices will be higher this quarter because of rising crude oil prices. Benchmark U.S. crude finished at $93.67 a barrel in Tuesday trading. That's up almost $14 a barrel since the end of June. Gas pump prices have risen from an average of $3.35 a gallon to $3.63 a gallon at the same time.

EIA expects U.S. crude will average $90 a barrel in the second half of this year, up $2 a barrel from the July outlook. Brent crude, which is used to price much of the oil imported into the U.S., will average $103 a barrel in the second half of 2012, according to EIA, about $3.50 a barrel higher than last month's estimate.

EIA also pointed out that the severe drought affecting much of the nation's corn crop has cut ethanol production. EIA reduced Its outlook for annual production by half a billion gallons, to 13.3 billion gallons. Ethanol is added to much of the gasoline used in the U.S. to help reduce the country's dependence on foreign oil and lower emissions of air pollutants.

Natural gas prices are expected to remain low for the rest of the year, averaging $2.67 per 1,000 cubic feet. That compares with an average of $4 per 1,000 cubic feet last year. Still, EIA noted that 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," the report said.

Source: http://news.yahoo.com/government-raises-forecast-oil-gas-prices-193332513--finance.html

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