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Oil Prices Soar, DOE Ups Price Predictions, Senators Look for Relief

May 7, 2008

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As crude oil prices soar to new records, the U.S. Department of Energy is predicting the price of a gallon of diesel will average close to $4 per gallon in 2008, and Democrats in the U.S. Senate are proposing measures
to address the situation.

According to the Associated Press, Senate Democrats Wednesday called for a temporary windfall profits tax on oil companies and cutting out $17 billion in oil industry tax breaks as part of an energy package. The proposal also calls for federal fines for energy price gouging and stopping oil deliveries into the government's emergency reserve.

Wednesday, the price of a barrel of oil surged soared to a record 123.53 on the New York Mercantile Exchange.

In its May "Short-Term Energy Outlook," the DOE's Energy Information Administration predicted that crude oil prices will average $110 a barrel this year, about $9 per barrel higher than the projections it made just a month earlier. It predicts the average price for diesel will be $3.94, more than a dollar over last year's average and higher than the $3.62 forecast issued last month.

The agency noted in its report that the global oil supply system "continues to operate at near capacity and remains vulnerable to both actual and perceived supply disruptions… the flow of investment money into commodities markets and ongoing geopolitical concerns in a number of producing countries … have contributed to crude oil price volatility."

According to published reports, much of the Democrats' proposal would likely be vetoed by President Bush. Only the idea to stop putting money into the Strategic Petroleum Reserve appears to have widespread support, with a Republican energy package announced last week also calling for that action.

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