Iowa gas prices climb toward $4, but may fall again during summer

Demand not strong enough to keep prices in elevated terrotory

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The recent increase in gas prices is likely to continue through spring, but the demand isn't there to keep prices in record territory for long.

"We'll peak out about $4 sometime prior to Memorial Day, most likely, unless there's some anomaly as far as a political or economic or environmental issue," said Gail Weinholzer, spokeswoman for the AAA Minnesota/Iowa.

That would be near a record, and about what gas cost at the same period a year ago. Weinholzer noted prices followed a similar pattern in 2011, although a gallon of unleaded regular is about 30 cents more than a year ago, according to the AAA's Fuel Gauge Report.

"That was primarily due to the ethanol tax subsidy coming off the books," Weinholzer said. The end of the 45-cent-a-gallon tax break was felt mostly by drivers of E-85 vehicles. Regular gas is 10 percent ethanol.

Weinholzer expects prices to increase another 15 to 20 cents a gallon through the end of this month, when refiners switch to producing gas mixed for warm weather, and then to recede over the summer.

Despite high crude prices on the world market due to Middle East concerns, a continued weak economy means the demand just isn't there to push prices much higher for very long, Weinholzer said.

"Crude oil was hovering about $100 a barrel, and domestic demand was not increasing, so some refineries have cut back," she said.

Cedar Rapids' average of $3.46 on Monday is 9 cents more than last week and 30 cents more than in mid-January. According to the AAA, regular unleaded in Iowa peaked at $4.02 a gallon July 16, 2008, but the highest price in Cedar Rapids was $3.97 last May 13.

U.S. production continues to boom, driven by new fields in North Dakota and drilling in the Gulf of Mexico. According to the U.S. Energy Information Administration domestic crude production is about 5.8 million barrels a day, up about 1 million from the same period last year.

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