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California gas prices back above $3.75, U.S. average near $3.50

July 23, 2012

Average pump prices for retail gasoline in California are back above $3.75 a gallon this week, and the U.S. average is headed back toward $3.50 a gallon, but some analysts are expecting a sustained slide in oil prices that could bring much relief in the future.

The average cost of a gallon of regular gasoline in California is $3.780, up 6.4 cents since last week, according to the AAA Fuel Gauge Report. It was only the second week-to-week price rise in the past 10 weeks.

Nationally, the average price for a gallon of regular gasoline is $3.471, up 7.5 cents since last week. The U.S. average has risen during the past two weeks after falling for 13 straight weeks  from its high of the year of $3.941 a gallon.

U.S. crude oil prices were back below $90 a barrel in trading on the New York Mercantile Exchange as fears that the European Union would fail to resolve its debt crises outweighed Middle East concerns about possible Israeli retaliation over the recent terrorist attack on tourists in Bulgaria. U.S. oil prices were down $2.28 to $89.55 a barrel so far in the trading day.

Bob van der Valk, a petroleum industry analyst, said fears about potential crises, like periodic threats from Iran about closing the Strait of Hormuz, have been muted by recent developments in the U.S. and in the Middle East.

One such development, Van der Valk said, was the opening last week of a crude oil pipeline connecting the United Arab Emirates with a harbor on the Gulf of Oman. The pipeline, he said, was the first real attempt "to skirt the Arabian Gulf, which is currently being used by Very Large Crude Carriers to ship 20% of the world demand for crude oil."

Fadel Gheit, senior energy analyst for Oppenheimer & Co., said increasing U.S. crude oil production could send oil prices lower. "The futures markets indicate that crude oil prices could decline for the next three years," Gheit said Monday in a note to investors.

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