As prices drop toward $3 a gallon, one expert predicts the end of sky-high gasoline

Despite predictions of $5 a gallon gasoline earlier this year, prices continue to head downward. Now, $3 a gallon gasoline is a possibility by the end of July.

On Thursday, Palm Beach County's average price for regular gasoline stood at $3.35 a gallon, and Florida's at $3.22.

In early April, both the state and Palm Beach County's gasoline prices reached this year's high at $3.97 a gallon.

"At this point it does look like prices are going to continue to fall. If they continue to fall at the rates they have been, which is about 5 cents week after week, then it is likely that we could see prices at $3 or below $3 by mid to late July," said AAA Auto Club South spokesman Jessica Brady.

In fact, one analyst says the era of high gas prices may have ended, and that prices this summer could be the highest motorists will ever pay.

"In the U.S. we are never going to consume the amount of gasoline we did in 2007, probably ever, " said Phil Flynn, senior market analyst for Price Futures Group in Chicago. "Supplies of oil will be so much more ample, and demand lower. It is the recipe for a new era of lower gas prices.

"I'm not saying we won't see ups and downs. The highs will be lower, and the lows will be lower," Flynn said.

Flynn bases his opinion on a number of factors. U.S. gasoline demand is declining. Oil production continues to rise and constantly improving technology will only enhance output. Oil production is growing in Canada, Brazil and elsewhere. More energy use is being shifted to natural gas.

Cars with better fuel economy, such as hybrids, are becoming cheaper and more common. Natural gas vehicles such as the 2012 Honda Civic have debuted, even though it's difficult to find a station to fuel them.

The slowing global economy, 8 percent U.S. unemployment and an aging population which drives less play roles as well.

"Unless there is a war or some kind of major U.S. currency devaluation…generally speaking the fundamentals for the U.S. gasoline market have changed. If you look at the run-up in gasoline this summer, this could have been the crescendo," Flynn said.

This year's run-up was due to market complacency with Iranian oil. Then the market moved to replace Iranian oil because war was feared.

"People started to realize, we don't need Iran's oil. Iraq is producing more oil every day, and the U.S. is producing the most oil since the 1960s. If you look at new technologies around the globe, we will be producing more and more oil. At the same time the global economy is slow. It is chugging along," Flynn said.

Gregg Laskoski, a Tampa-based senior analyst with GasBuddy.com, said the reason for the downward price trend is that that oil and gasoline production are exceeding supply both globally and in the United States.

While Laskoski agrees prices will continue to decline incrementally in the near term, he said it's difficult to forecast beyond that because too many things can happen.

"If there is a conflict, you will see crude oil prices go sharply in the opposite direction. If there is an adverse weather event that threats the Gulf of Mexico, you could have an immediate disruption on the supply side."

Laskoski said an outlook that we have entered a new era of low gas prices is extremely optimistic.

"Even if crude oil prices do not change from the level that they are at now, we will have a considerable reliance on oil refineries that are aging, " Laskoski said.

That was seen on the west coast earlier this year when four out of 12 California refineries closed at the same time and prices rose to over $4 a gallon, Laskoski said.

"Who is to say we can't see similar types of refinery problems in other areas?" Laskoski said. "Because we are so reliant on these things, we tend to forget just what can happen if things go wrong."

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