Crude prices fall on profit-taking, but analysts expect gasoline prices to rise

(AP) Oil prices fell Friday as investors sold to lock in profits, but analysts say gasoline prices are about to start rising again, following oil’s recent record-breaking run.

Gasoline prices have so far held steady or even fallen despite a rally that has boosted oil to new records in each of the last eight trading sessions on the New York Mercantile Exchange.

“That’s over now,” said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. “From now on, every $1 a barrel advance in crude has to be accompanied by a 2 1/2 cent increase in gas prices.”

Oil’s advance has been driven by a combination of the Federal Reserve’s half-point interest rate cut, the falling dollar and concerns that tropical storms will strike key oil and gas installations in the Gulf of Mexico.

Interest rates and their role in pulling the dollar lower are drawing fresh investment dollars into energy markets, analysts say.

Because oil and other commodities are priced in dollars, they still appear cheaper to overseas investors, whose currencies have strengthened against the dollar.

Despite Friday’s swoon, many analysts expect oil to continue rising in the near term.

“What interest rates were placed at … is the key to oil prices going higher,” said James Cordier, president of Liberty Trading Group in Tampa, Fla.

As oil has risen, the spread between what many retailers pay for their gasoline and what they charge consumers has shrunk substantially, or even reversed in some cases.

“The people who actually sell the gasoline are really, really suffering,” Kloza said.

Retail gas prices in many areas are already a nickel behind where they would need to be to allow retailers to turn a profit, Kloza estimated.

Gas prices will likely rise an average of 10 to 15 cents a gallon nationwide over the next couple of weeks, Cordier said.

Now, with peak summer driving season receding in the rearview window, many analysts had concluded that falling demand would compensate for supplies, which are again falling.

They didn’t count on oil’s fall surge. Gas prices have little choice but to follow, Kloza said. Still, he doubts prices will again reach the $3 level this year.

Oil prices typically peak for the year in early October, Kloza said. When that happens, oil prices will decline into the winter months, pulling gasoline back down.

But in the meantime, he said, oil could rise as high as $91 a barrel.