Heading into driving season, motorists are wondering where pump prices are likely to peak. That knowledge, if nothing else, will help homeowners decide whether a drawdown on their equity lines of credit will be necessary to fuel the family chariot for their summertime frolics.

Mortgaging one's future for fuel seemed a much grimmer reality at this time last year. The average gallon of petrol cost $4.09 in the first week of June 2008. Now, that same fuel can be had for $2.67.

Still, gasoline costs have been rising at a fast clip since their yuletide nadir. Gasoline cost only $1.71 a gallon at the pump last Christmas. In the last 30 days alone, wholesale fuel costs have jumped better than 15%.

The biggest influence on gasoline pump prices, as you might well imagine, is the cost of raw ingredient crude oil. Over the past decade, crude oil input costs have accounted for 51% of the pump price of gasoline in the United States. That's the average contribution, mind you. There have been times, most notably the summer of 2008, when crude oil costs figured even more prominently in the price equation.

At the peak of the driving season last year, when crude oil was trading at $145 a barrel, the black stuff's contribution to pump prices jumped to 76%. At the other end of the cycle, crude's price influence wanes. Amid the dripping liquidity of early 2001, for example, oil's weight was felt lightly at the pump, accounting for just a third of gasoline's retail price.

With that kind of a history, it's not hard to understand how crude oil's settlement above the $70-a-barrel level has got gasoline customers more than a bit, um, unsettled. Oil's now kicking in 63.5% to the pump price of petrol. People are wondering if it's going to get better or worse now that the $70 plateau has been attained.

If the government's to be believed, it'll get worse before it gets better. Not much worse, though. Tuesday, the U.S. Energy Department revised its 2009 energy price forecasts upward after being caught rather flatfooted by the market's recent velocity. Spot West Texas Intermediate (WTI) crude is now expected to average $67 per barrel for the second half of 2009. Previously, the agency had forecast a $55 average price for crude. To date, crude's average cost this year's been about $49 a barrel.

Nationwide regular-grade gasoline prices, say the Feds, should peak in July near $2.70 a gallon, only 8 cents above current levels.

Given the government's track record of underestimating fuel costs, consumers and investors alike are skeptical of such prognostications. Everybody's wondering about the odds of gasoline prices again outdoing Energy Department guesses.

Seasonality

It'll come as no shock to anyone that we're now in gasoline's high season. Looking back at 10- and 20-year patterns, gasoline futures typically peak in late May or early June and spend most of June rangebound until a final price spike in early July sets up a decline into the July contract's expiration. In gasoline's longer history, prices slid deeply in July, but that's not been the case so much in recent years.

Last year was atypical in the extreme. Prices didn't develop the usual June trading range top in 2008. Gasoline, driven by skyrocketing crude oil, stalled only after the Independence Day holiday. And what followed was a precipitous drop, not a trading range.

In 2007, gasoline's double top was marked between May 21 and July 10. Similarly, the 2006 market peaked between May 11 and July 14.

If 2009 is going to be more "typical," then we ought be seeing a trading range by now. Looking at gasoline's price chart, that hardly seems to be the case.

NYMEX RBOB Gasoline (Jul. '09)

Technically, gasoline's uptrend remains strong. Though there are indications that the market's reached overbought levels, that's little assurance that prices will soon backslide. In fact, the most recent Energy Department inventory report, showing a surprising 1.6-million-barrel drawdown in gasoline stocks, has encouraged buying. Supplies of gasoline are now below seasonal norms and the energy agency noted a 0.4% uptick in fuel demand from year-ago levels.

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