Gasoline Price Forecast

The monthly report from the department’s Energy Information Administration also predicted oil prices will average $110 a barrel this year, up $9 from last month.

The EIA said high prices will cut U.S. demand for petroleum products by 330,000 barrels a day this year, up from a forecast last month of 210,000 barrels. But it repeated its prediction that demand from countries such as China, India, Russia, Brazil and the Middle East will support high prices and keep global oil demand growing about 1.2 million barrels a day this year.

Oil futures, meanwhile, set a trading record of $122.73 a barrel before retreating to settle up $1.87 at $121.84 on the New York Mercantile Exchange.

Motivating much of Tuesday’s oil buying was a Goldman Sachs prediction that prices could rise to $150 to $200 within two years.

Oil prices have nearly doubled from about $62 a barrel a year ago, which Goldman sees as a sign the world is in the midst of a “super spike” in prices. Analyst Arjun Murti said in a note released Monday that prices would ultimately force demand to fall sharply.

Not everyone shares Goldman’s view. Tim Evans, an analyst at Citigroup, countered Goldman’s analysis with a note predicting that crude prices could as easily fall to $40 a barrel as rise to $200 over the next two years because supplies are, as he put it, comfortable.

James Cordier, president of Tampa trading firms Liberty Trading Group and OptionSellers.com, said Goldman’s prediction isn’t necessarily new: “We’ve heard numbers like these out of Goldman Sachs, especially over the last 12 months.”

It’s not the first time Murti has espoused a super spike theory. In an April 2005 note, he predicted oil was in the early stages of a rally that would send prices from a then record of about $57 a barrel to $105.

A falling dollar on Tuesday also gave traders reason to buy. Investors often buy commodities such as oil as a hedge against inflation when the dollar falls. A fall makes oil cheaper to foreign investors.

At the pump, meanwhile, the national average price of a gallon of regular gas slipped 0.1 cent overnight to $3.61, ac-cording to AAA and the Oil Price Information Service. Prices have slipped lower since May 1, leading some analysts to say gas is close to peaking. Others predict it will follow oil’s upward surge.