Average gasoline prices in California inched closer to the celebrated $2-a-gallon mark in the last week, but motorists may not want to get too comfy behind the wheel, as oil prices Monday shot past a less welcome milestone.
Crude oil, which accounts for about half the price of gasoline at the pump, rose past $60 a barrel in New York futures trading. That bolstered the stance of analysts who had been predicting that retail fuel prices were poised to rebound.
In California, the statewide average cost of self-serve regular fell 3.8 cents over the week to $2.396 a gallon Monday, according to the government's weekly survey. The price drop was the smallest of 12 straight weeks of declines in California.
A sprinkling of Southern California gas stations were selling regular for $2.11 a gallon or less Monday, according to listings compiled by Gasbuddy.com.
The nationwide average fell 1.8 cents to $2.20 a gallon, reversing course after a small uptick the previous week. Among the cities and states surveyed by the Energy Department, Houston posted the lowest average at $2 a gallon.
A year earlier, California's average gasoline price was 26.3 cents higher and the U.S. average was 17.6 cents higher.
On Monday, light, sweet crude for December delivery traded as high as $60.56 before closing at $60.02 a barrel, up 88 cents on the New York Mercantile Exchange. Traders attributed the increase to renewed violence in Nigeria's southern oil region as well as speculation that there would be more production cuts among members of the Organization of the Petroleum Exporting Countries next month.
OPEC ministers held an emergency meeting last month in an attempt to halt a dramatic slide in oil prices, which fell more than 20% after hitting a peak above $78 a barrel in July. At the meeting, OPEC members agreed to cut output by 1.2 million barrels per day starting Nov. 1, but Saudi Oil Minister Ali Ibrahim Naimi told reporters Monday that further reductions might be necessary to put the oil market "in balance."
Stephen Leeb, editor of a monthly investment newsletter, is among those who see higher prices ahead for oil and gasoline. Leeb said his forecast wasn't tied to today's elections, which some have theorized were a factor in the fuel-price decline of recent months.
"I think they're going to rise. Not necessarily because they were overtly manipulated but because inventories have been going down and you're now going to see OPEC cuts kick in," said Leeb, who wrote "The Oil Factor," a book predicting an era of turbulent oil prices. "The rhetoric from OPEC is that they are pretty determined to keep oil around $60."
Tensions over Iran's nuclear program are likely to heat up as well, he said. "By the end of the year $70 to $75 oil is more likely than $50 or $55. Gasoline will go back up to $2.70 or so."
Tom Kloza, the chief oil analyst at Oil Price Information Service, sees the next few months differently.
"The big moves for 2006 are over," Kloza said. "We're not going to see a big rise after the election. I wouldn't give anyone in politics that much credit."
He sees gasoline prices leveling off nationwide, with no big swings through the rest of the year. Kloza believes the trend will be the same in California, even though the wholesale gasoline price shot up more than 20 cents a gallon last week on the Los Angeles spot market -- often an indicator of future retail prices.
"I'm inclined to believe that this is not the beginning of a big move up," he said of the spot price jump. Lower seasonal demand was one of the factors behind the cooling prices, Kloza said.
"It's very difficult for high prices to be sustained in November, December and January, even in California."