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Gas prices rising, and expected to rise further

Updated: February 5, 2012 8:17AM

Expect a roller coaster ride with gasoline prices this year.

Analysts expect the price of unleaded regular gasoline, which averaged $3.51 a gallon in the Chicago area Tuesday — the highest ever at the start of the year — to peak above $4 a gallon this year and reach a low below $3 a gallon.

“We’re not going to go straight up,” said PFGBest oil industry analyst Phil Flynn. “I think we’re going to see a year of volatility. We’re going to see prices spike, then we’re going to see prices fall depending on how the news plays out over the year.”

In the Chicago area, the average annual price of unleaded regular gas last year was the highest ever at $3.78 a gallon. Record average annual prices also were set nationally for 2011 and for the start of 2012, according to AAA, the Oil Price Information Service and Wright Express.

“I think we’ll see both higher highs and lower lows,” is Oil Price Information Service Chief Oil Analyst Tom Kloza’s prediction for gas prices this year. He expects prices in Chicago to peak above $4 a gallon.

“Chicago is certainly one of those markets where we’ll see prices above $4. It’s a question of do you peak at $4.25 or do you peak at $4.05,” Kloza said.

Nationally, he said we could “see a return to sub-$3 (gallon) gasoline in the second half of the year,” although Chicago prices will be higher, he said.

Factors that will help push prices up throughout the year include fear of another “Arab spring,” the closure of key European refineries, while the return of Libyan oil to the market and further declines in gasoline demand could push prices lower, analysts said.

Prices in the Chicago area rose nearly 5 cents a gallon Tuesday from a week earlier thanks in part to tensions in Iran, which have sent oil prices soaring. Benchmark crude jumped by $4.13,or 4.2 percent to end the day at $102.96 per barrel in New York. Brent crude rose by $4.75, or 4.4 percent, to close at $112.13 per barrel in London.

Commodity prices tend to rise at the beginning of January as investors start the new year with a fresh round of trading. This year prices were driven up by concerns that Iran might try to close the Strait of Hormuz in the Persian Gulf to oil tankers if Western nations impose new sanctions designed to halt its nuclear program. One-sixth of the world’s oil shipments pass through the strategic waterway every day.

Contributing: AP

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