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Energy Department forecasts $4-a-gallon gas

Consumers, already tightening their budgets, will likely pay close to $4 a gallon on gasoline this summer, according to an annual summer fuel report released Tuesday by the the Energy Department.

The increase is blamed on crude oil prices which hit $109 a barrel Monday and are expected to average $101 through this year because of a strong worldwide demand.

That means gasoline will cost about $3.60 and even more in California because of higher taxes and stricter refining requirements. As of now, California’s gasoline is 35 cents to 40 cents more than the national average.

The United States’ gasoline use has steadily increased year-after-year because of a robust economy. Now, it’s expected to decline by about 85,000 barrels per day, or .3 percent, because of higher prices and the ailing American economy.

The higher prices hurt consumers, as well as small business owners like Jorge Perez, who runs Merced Dairy Distribution Inc. with his brother, Henry.

The government-regulated price of milk means he has swallow the higher fuels costs, making his profit margin smaller.

To make matters worse, he’s found that people are buying less milk, which cuts down on the volume of his daily deliveries across Merced and Madera counties.“Business is really tough,” 35-year-old Perez said between deliveries. “There’s no relief in sight.”