Travellers can expect to pay more for plane tickets and gasoline this summer as oil prices appear to be set to rise and stay high.

"In the last several years, the price of fuel, particularly gasoline has gone up in the summer months," Doug Mayhew of the Canadian Automobile Association said on Tuesday.

The rising costs are a reflection of growing demand in the summer, explained oil industry analyst Wilf Gobert.

"While demand goes up in the summertime because we all drive more, demand is substantially less in the wintertime when the days are short and it's cold and we don't want to be out," Gobert told CTV's Canada AM.

"And so the industry suffers, on average, low profit margins during the fall-winter months. In the summertime is when they have the opportunity, if you wish, to increase that price," he said.

Gasoline prices have been rising in recent weeks.

M.J. Ervin reported an average pump price of 104.9 cents per litre in its weekly report released Tuesday -- a rise of 2.2 cents over last week's average price.

In Vancouver, the average was about 109.3, and in Montreal it was about 107.4 cents, while in Calgary it was 96.2 and Toronto it was 102.2.

Motorists in Labrador City are paying 119.2 cents per litre. If you're passing through Lethbridge, Alta., tank up -- gas there is only 93.8.

One small break could come in the federal budget if the Conservatives cut the GST by one point. That could save motorists about 30 to 40 cents on every tank of gas.

Faith Goodman, a spokesperson for the Canadian Petroleum Products Institute, told Newsnet that "net of taxes, when you look at Canada's price of fuel at the pump, we have one of the lowest prices of gasoline in the industrialized world."

Air fares

High fuel prices are also hitting the cost of air  travel.

Air Canada announced Tuesday that it is boosting its surcharges to compensate for rising fuel costs.

The fare increase is effective immediately and applies to domestic flights as well as journeys to and from the U.S. It doesn't apply to international routes.

"I'm going to be rather puzzled to why if you're flying within North America there's one set of fuel parameters, and if you're flying internationally there's another," Brad Davies of Global Travel told CTV Vancouver.

"There's a certain amount of arrogance in the sense that they know they can get away with it," he said, but added Air Canada's fuel bill is likely higher than Westjet, its main competitor.

The increase will also affect published, web and other special fares for travel on the main airline and regional airline Air Canada Jazz.

Fares for domestic flights will see an increase each way of $6 on short-haul flights up to 483 kilometres, $8 on medium-haul flights between 484 and 1,609 kilometres and $10 on long-haul flights of 1,611 kilometres or more.

Base fares for flights between Canada and the United States were increased each way by $6 on flights up to 1,207 kilometres, $8 on flights between 1,209 and 2,414 kilometres and $10 on flights of 2,416 kilometres and more.

"The cost of fuel is the second-largest operating expense for airlines after labour," the airline said in a news release.

"In January 2004, Air Canada led the Canadian industry by incorporating fuel surcharges into domestic Canada fares. The airline will continue to monitor fuel prices closely and adjust fares accordingly."

The airline wouldn't give an on-camera interview to CTV Vancouver.

U.S. forecast

In the United States, the government reported that motorists should expect little relief at the pumps during this summer's heavy driving period.

The Energy Department's new seasonal outlook projects the price for regular grade gasoline will average $2.62 a gallon (69.1 cents U.S. per litre) this summer, up 25 cents from last year.

Gasoline prices have shot up in the U.S. since February. The national pump cost soared 9.5 cents in the past week to $2.68 a gallon, 40 cents higher than the national average last year.

"Gasoline prices are expected to increase because of the higher cost of crude oil compared with last year and the increase in production and distribution costs associated with (low sulphur fuel requirements) and the phase-out of MTBE" by refiners for ethanol as the preferred fuel additive, the U.S. Energy Information Administration said Tuesday in its summer forecast.

That forecast covers the period from April through the end of September.

However, experts don't think the high prices will lessen demand during the busy driving season.

The United States' top energy forecasting agency predicts motorists will use an average 9.4 million barrels of gasoline a day, about 1.5 per cent more than last summer.

The agency cautioned that prices could rise even higher if there are unexpected supply disruptions caused by the weather or refinery problems.

In addition, traders worry about production disruptions in Iran and Nigeria and the fact that U.S. oil production in the Gulf of Mexico hasn't yet returned to pre-hurricane levels.

Prices on the New York Mercantile Exchange briefly broke $69 US per barrel for May delivery on Tuesday, setting a new high for 2006.

"There are a lot of reasons why we could be rallying today," said commodities trader Raymond Carbone.

"Of course the political situations mentioned over the weekend, Nigerian unrest and the prospect, or at least putting on the table, the threat of a nuclear strike against Iran, certainly has not hurt the oil market."

With a report from CTV's David Akin