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Record gasoline prices predicted this summer Federal report sees $1.74 as nationwide average for summer months Larry Persily Petroleum News Government Affairs Editor
The U.S. Energy Department’s short-term price and production outlook warns of record gasoline prices this summer, oil prices centered near $30 a barrel all year and natural gas likely to average $5.20 per thousand cubic feet for 2004.
None of which is particularly good news for airlines, trucking companies, electrical generating plants or summer vacationers on the nation’s highways.
“The prospects for oil prices diminishing significantly prior to the driving season have weakened,” said the Energy Information Administration report issued March 9.
“National monthly average regular gasoline pump prices are projected to reach about $1.83 per gallon this spring. Summer gasoline prices are now expected to average about $1.74 per gallon,” the report said. “This would be a record in nominal dollar terms and the highest inflation-adjusted summer average since 1985.”
West Texas Intermediate prices averaged almost $35 a barrel in February, with the Energy Department expecting a slow decline and prices to average near $30 for the entire year. “Modest oil price declines (also) are expected in 2005 as Iraqi oil production continues to increase and inventories are rebuilt to normal levels,” the report said. Forecast assumes OPEC production cut The Energy Department’s forecast of continued above-average oil prices assumes OPEC members, other than Iraq, will reduce production by about 1.5 million barrels per day by May, close to the target announced by the Organization of Petroleum Exporting Countries.
However, political turmoil in Venezuela and uncertainty whether OPEC will cut production too much could cause price spikes, the department said.
Making up for OPEC production cuts in the market will be 1.2 million barrels per day of increased oil flow in 2004 and the same amount in 2005 from non-OPEC nations, primarily from Russia and the Caspian Sea region, with some help from Africa, Canada and Mexico.
The report’s price forecast also is based on the assumption that worldwide oil demand grows by 2 percent a year in 2004 and 2005.
Natural gas prices are predicted to fall a bit from 2003 averages to around $5.20 for 2004, and then marginally lower for 2005, the report said. “As in other recent projections, this outcome depends on domestic and imported supply continuing to grow modestly in 2004 and 2005. Continued growth in number of gas wells “(Domestic) natural gas production is expected to continue to expand through 2005 as natural gas well completions, which totaled an estimated 20,000 in 2003, continue to grow to between 22,000 and 23,000 wells per year over the next two years.”
The average residential natural gas heating bill for the winter of 2003-2004 was up 12 percent from a year ago.
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