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Have gas prices peaked?

On the sign-post up ahead ...


Have prices peaked, or are we witnessing the tip of a rapidly rising iceberg?

Updated - June 23 - Gas prices did drop ... slightly. The current average is $3.03, down two cents since Friday. Not much of a drop, but it beats a poke in the eye with a sharp stick ... Our intrepid gas spies have located more than 50 stations at or below $2.95 a gallon.

Friday, June 19, 2009 - We reported an average price per gallon in San Diego County of $3.05 a gallon, a record high for 2009 and $1.16 more than the price of gas at the beginning of the year.  

As of this morning, many analysts were bullish about gas prices going even higher. We're not so sure - at least not for the short term. Yesterday, when we made our twice-weekly predictions for the San Diego and Los Angles NBC News affiliates, we said that prices could drop as much as six cents by Monday morning.

We based our prediction on the fact that even though oil prices keep rising they do not reflect real-world demand. Most of the people buying oil on the futures market are doing it because they think it is a safe haven for their money, and because large investment firms such as Goldman Sachs, have predicted that oil prices will go higher.  Very few of these investors have the ability to actually store the oil they buy - they are simply speculators.

The reality is that oil is over-valued. Demand is down, and the economy stinks. So while investors have created a short term price bubble for oil, it doesn't necessarily mean that gas prices will go up even further  ... at least not in the next few days.

Will we see $4.63 a gallon gas again this year?

Last year at this time, gasoline cost about $4.60 a gallon on average. The it stayed in the mid-fours throughout the summer. It is highly unlikely that gas prices will spike to this level again ...  although ... because the oil markets are so irrational ...  anything is possible. In the very long term (several years) the possibility of $4 a gallon gas is almost inevitable, if only because of a weakening dollar.

In the meantime, if historical patterns hold true, we should see gasoline flirt with the $3 mark in San Diego for the next six to 12 weeks with the possibility of $3.50 a gallon later this year if oil prices continue their irrational climb and if California's refineries continue their practice of restricting gasoline supplies to drive up prices.