Forecast: Gas to Peak at $2.30 This Summer
Despite the dismal economy, motorists may want to take to the road this summer. The federal government says gasoline prices are expected to stay relatively low, according to Associated Press.
The Energy Information Administration (EIA) on Tuesday (April 14) projected regular-grade gasoline to average $2.23 a gallon during the April-through-September driving season. The monthly average is likely to peak at $2.30 a gallon. That’s still a bargain compared to last summer, when gasoline cost an average of $3.81 a gallon and soared for a time past $4.
The report also said U.S. crude oil production declined by 110,000 barrels a day last year because of Gulf Coast hurricanes, but should rebound by an additional 440,000 barrels to 5.4 million barrels a day this year, the first increase in domestic production since 1991.
In recent weeks gas prices have edged higher from their lows in December. Last week gasoline averaged $2.05 a gallon. The energy agency attributed the increases to slightly higher crude oil costs and refiners trying to recoup some profits.
The EIA report projects crude oil prices to average $53 a barrel this year, but to increase by about $10 a barrel in 2010. But it said a stronger-than-expected economic recovery, lower global production or “more aggressive action to cut production” by the OPEC oil cartel “could lead to a faster and stronger rise in oil prices.”
Despite the drop in crude prices as well as cheaper gasoline, U.S. consumption of petroleum products, mainly gasoline and diesel, is forecast to decline for a second year in a row because of the economic downturn, the report said.
It said consumption declined by 6.1% last year, compared with 2007, in part because of the high cost of fuel in the first half of the year, and is expected to drop another 2.2% this year, or by 430,000 barrels a day. An expected economic upturn will increase demand in 2010 by 1.4%, the report said.
There should be plenty of gasoline available this summer. Refinery production is projected to increase by about 240,000 barrels a day compared with last summer. Total gasoline stocks as of April 1 were slightly less than last year at this time, but higher than the five-year average.
More ethanol will be blended with gasoline this year, as required by law. The EIA said an average of 670,000 barrels a day of ethanol to be blended, compared to 635,000 barrels a day last summer.
Still, the EIA said the growth of ethanol plant capacity will slow dramatically in 2009 as lower gasoline prices depress profits in ethanol production and the constraints in the financial markets curtail plant construction plans.