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Gas could peak at $4 in 2012

The new year could bring price peaks exceeding $4 for a gallon of regular gasoline if past trends hold true, according to analysts. "The chances are pretty good that we'll see fairly sharp increases," said Gene LaDoucer, spokesman for AAA North D...

Gas prices
Mohammad Rezaie changes the gas prices at his Union 76 gas station in Oakland, Calif., on Nov. 11, 2011. (AP Photo/Paul Sakuma, File)

The new year could bring price peaks exceeding $4 for a gallon of regular gasoline if past trends hold true, according to analysts.

"The chances are pretty good that we'll see fairly sharp increases," said Gene LaDoucer, spokesman for AAA North Dakota.

Based on the average retail price of gasoline at the start of the year and the amount prices historically climb in a year, a gallon of regular could easily exceed $4 by spring, according to analysts.

LaDoucer said there is usually a 36-percent price spike from Jan. 1 to the annual peak.

"A 36-percent increase from where we are now would put prices in the neighborhood of $4.42," LaDoucer said. "We certainly hope that's not the case."

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The average price per gallon in North Dakota on Jan. 1 was $3.25, the highest price ever for the start of a year, according to AAA.

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In the past year, drivers in the state also paid a higher average annual price, $3.57 a gallon, than any year before. The previous highest annual average of $3.24 was set in 2008, AAA said.

Patrick DeHaan, an analyst with the website NorthDakotaGasPrices.com, said that $4 per gallon was a likely possibility based on average yearly price increases.

According to that website, over the past seven years, the average price increase from the year's starting price to its peak was 93 cents nationwide. Last year began with a national average of $3.05 and peaked at $3.96 per gallon May 11.

"It doesn't bode well," DeHaan said.

The expiration of the federal subsidy for ethanol could also contribute to higher prices. With tax credits for ethanol blenders expiring Jan. 1, the price of a gallon of gasoline containing 10 percent ethanol could increase 3 or 4 cents, LaDoucer said. The price increase for blends with higher ethanol contents could be higher.

Gasoline prices typically peak around Memorial Day when travelers push up demand. Refineries usually produce less in the spring as they switch from winter to summer blends.

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Strain on consumer

The price increases will be hard to absorb for households that have not seen increases in their incomes.

"It'll have a profound effect," DeHaan said.

Drivers in North Dakota tend to consume more gasoline and spend more of their monthly income on gas than residents of other states, according to the Oil Price Information Service.

That organization's data said North Dakotans in October 2011 bought 129.9 gallons of gasoline per household, accounting for 11.9 percent of monthly income. Only three states have residents who pay a large portion, with Montana paying the most.

Minnesotans bought 95.4 gallons per household during October 2011, accounting for 7.1 percent of their monthly income.

Drivers usually react to high prices by driving less or switching to more efficient vehicles if they can.

"That's usually what drives prices back down," LaDoucer said. "People seem to find ways to reduce consumption when gas hits $4."

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DeHaan said that demand is already relatively low, but the price of oil has been volatile, in part because of tension over oil supplies in the Persian Gulf.

"Oil's been all over the map," he said. "Oil's been up $10 barrel in the last two weeks."

LaDoucer said he hoped price increases do not follow historical trends, but it was likely they will.

"Consumers should be prepared," he said.

Reach Bjorke at (701) 780-1117; (800) 477-6572, ext. 117; or send e-mail to cbjorke@gfherald.com .

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