In its latest Short-term Energy Outlook, the Energy Information Administration forecast regular grade gasoline prices will average $3.79 gallon this year, nearly 25cts higher than month prior estimates and 26cts above the year-ago average amid higher crude oil prices.
The agency reported regular grade gasoline retail prices averaged $3.53 gallon in 2011, which was 74cts or 27% higher than the 2010 average. Higher crude oil costs and refinery margins, 60cts and 10cts per gallon, accounted for most of that increase.
During the April through September summer driving season this year, EIA said prices are forecast to average about $3.92 gallon with a peak monthly average price of $3.96 gallon in May.
The June 2012 New York Harbor Reformulated Blendstock for Oxygenate Blending futures contract averaged $3.26 gallon for the five trading days ending March 1.
“Based on the market value of futures and options contracts, there is a 39% probability that its price at expiration will exceed $3.35 per gallon, consistent with a monthly average regular-grade gasoline retail price of roughly $4.00 per gallon in June,” EIA said.
The agency added that the value of futures and options contracts imply a 2% probability that its price at expiration will exceed $4.35 gallon, consistent with a monthly average regular-grade gasoline retail price of approximately $5.00 gallon.
The West Texas Intermediate spot crude oil price is expected to average about $106 bbl this year, $5 bbl above the prior month’s Outlook and $11 bbl higher than the average price last year. Supply disruptions in the Middle East and Africa contributed to a significant increase in world crude oil prices in February. EIA has increased the forecast 2012 average cost of crude oil to U.S. refiners from $105 bbl a month ago to $115 bbl. Constraints in transporting crude from the Mid-Continent region contribute to the expected continuing discount for WTI relative to other world crude oil prices.
The agency expects WTI prices to remain relatively flat in 2013, averaging about $106 bbl while the U.S. refiner average cost of crude oil averages $110 bbl.
The forecast calls for regular-grade gasoline prices to decline to an average $3.72 gallon in 2013, EIA said. This compares with calls in February’s Outlook for the fuel to average $3.59 gallon.
EIA expects on-highway diesel fuel retail prices, which averaged $3.84 gallon in 2011, will average $4.15 gallon this year and $4.11 gallon in 2013. This compares with month prior estimates at $3.91 gallon for 2012 and $3.99 gallon in 2013.
According to the report, annual average wholesale gasoline prices ranged from 5cts gallon to 11cts gallon above wholesale diesel prices between 1990 and 2004. Beginning in 2005, wholesale gasoline prices fell below wholesale diesel prices in all years except 2009 as world demand growth for diesel fuel, primarily in the emerging economies, outpaced gasoline demand growth. EIA expects the gasoline wholesale price to remain lower than diesel wholesale prices, with gasoline prices averaging 17cts gallon below diesel this year and 21cts gallon lower next year.
Meantime, this is the third consecutive monthly Outlook in which the forecast average household expenditures for heating fuels has been lowered because of continuing unusually warm weather for most of the nation. Average household heating oil expenditures are now expected to increase by only 1% this winter heating season—Oct. 1 to March 31—compared with last winter. Natural gas and propane expenditures are projected to decline by 11% and 5%, respectively, and electricity expenditures are 4% lower than last winter’s levels.
In 2011, total U.S. liquid fuels consumption fell by 340,000 bpd or 1.8% from the 2010 average level. Motor gasoline consumption accounted for much of that decline, shrinking by 260,000 bpd or 2.9%. In contrast, distillate fuel oil consumption rose 50,000 bpd or 1.3% brought about by recovery in industrial output and freight transport.
EIA said that even with forecasted U.S. real gross domestic product growth of 2.2% this year and 2.4% in 2013, the next two years are expected to see only small changes in total liquid fuels consumption with a decline of about 60,000 bpd this year and an increase of 110,000 bpd next year. Motor gasoline consumption, constrained by slowing growth in the driving-age population and the improving fuel economy of new vehicles, is forecast to fall by 60,000 bpd in 2012 and decline by 10,000 bpd in 2013. Distillate fuel consumption, however, continues to rise.
Fuel ethanol production is expected to grow from an average 910,000 bpd in 2011 to 920,000 bpd this year and 930,000 bpd next year. U.S. ethanol production is projected to exceed the volume that can easily be used in the nation’s fuel pool, so the U.S. will continue to be a net exporter of ethanol over the next two years.
EIA estimates that biodiesel production in 2011 average about 61,000 bpd, or 939 million gallons of total annual production. Forecast biodiesel production is seen averaging 64,000 bpd this year and 65,000 bpd in 2013.