The price of oil lingered around $100 a barrel this week, helping to keep retail gasoline prices at their highest levels ever for this time of year.
Crude has ranged from about $98 per barrel to around $102 per barrel this week. On Friday benchmark oil fell $2.21 to end at $98.33 per barrel in New York. The national average for gasoline was $3.38 per gallon Friday. Pump prices peaked at about $4 a gallon in May as crude oil approached $114 a barrel.
Oil and gasoline prices are staying high now because of tension in the Middle East and worries about Europe sliding into a recession.
Iran has threatened to close the Strait of Hormuz in the Persian Gulf, if the U.S. and other countries impose more sanctions on it because of its nuclear program. Many analysts doubt that Iran could set up a blockade for long, but any supply shortages would cause supplies to tighten.
Gas prices are likely to move up or down based on the outcome, PFGBest analyst Phil Flynn said. If the situation calms down, retail gas prices could fall from 25 cents to 50 cents a gallon. If the situation intensifies, prices could increase by that much.
"It's that much of a wild card," Flynn said. "I think it's a very volatile situation and I think we could go either way."
Europe is still struggling with massive debt problems that threaten to drive the region into recession. The uncertainty about how the crisis will play out is helping to keep oil prices up as well.
Retail gasoline consumption in the U.S. has been falling steadily for the past 10 months, according to surveys by MasterCard SpendingPulse. Although recent data points to the U.S. economy slowly improving, many drivers appear to be sticking with habits they picked up during the recession — watching how much they spend on expensive gas and combining trips to save on fuel.
Those habits may continue. Flynn and other analysts think that the national average for gas could reach $4 per gallon again by spring, as refiners switch to more expensive anti-smog blends ahead of the summer driving season.
In other energy trading, natural gas fell 3 cents to finish at $2.39 per 1,000 cubic feet. The price remains near a 10-year low because a mild winter has cut demand and supplies remain plentiful. Heating oil fell 5 cents to end at $2.99 per gallon and gasoline futures fell 3 cents to $2.78 per gallon.
Brent crude fell $1.69 to finish at $111.55 per barrel in London.
AP Energy Writer Chris Kahn contributed to this report.