U.S. Grovels-OPEC Nods -So Gas Prices Can Come Down

NEW YORK, June 3, 2004; Reuters reported that U.S. motorists may see the numbers over the gas pumps fall below $2.00 a gallon soon thanks in part to a planned increase in crude oil production from OPEC, the U.S. government said on Thursday.

Gasoline prices on the wholesale market are already sliding, down 16 cents a gallon since mid-May, and those discounts are likely to get handed down to consumers in the coming weeks, the U.S. Energy Information Administration said in a weekly report.

"Several key indicators suggest that gasoline prices may continue to fall in coming weeks," the EIA said.

Producer group OPEC, which controls 40 percent of world oil exports, agreed on Thursday to immediately lift its output limits by 2 million barrels per day (bpd), and lift them another 500,000 bpd starting in August.

OPEC's decision comes as the cartel struggles to rein in runaway oil prices that recently struck record highs over $40 a barrel on concerns over rapid global demand growth and turmoil in the energy-rich Middle East.

"Saudi Arabia and several other suppliers have pledged significant increases in crude oil production," the EIA said, adding this "would help put downward pressure on crude oil prices, which would help lower gasoline prices."

A decline in retail gasoline prices would be a boon for the nation's 200 million drivers, many of whom are logging in more time on the roads for vacation season and dishing out more money for fuel than ever before.

The EIA said any increases in shipments from OPEC nations would add to already high import levels, which last week struck the second-highest level on record and helped boost commercial crude inventories to their highest level since August 2002.

While gasoline prices may be on the way down, the EIA cautioned that drivers should not expect the low pump prices they saw before a nearly 60-cent spike this year.

"While prices could drop below $2 per gallon over the next couple of weeks, and may continue to fall thereafter, present market conditions do not provide a reason to expect prices to return to their level at the start of this year anytime soon," the EIA said.

The average retail price for regular gasoline fell 1.3 cents per gallon in the week ended May 31 to reach $2.051 per gallon, 57.8 cents higher than this time last year, the EIA said.