EIA predicts higher oil, gasoline prices

The U.S. Energy Information Administration predicts that crude oil prices will remain on an upward track through 2000.

In addition, EIA estimates that U.S. gasoline prices will average $1.13/gal for regular self-serve this summer, up 9-10¢/gal from the same period last year.

"Gasoline demand is expected to be up by 2% over last summer, aided by solid economic growth and by prices that, while noticeably higher than last summer, are still moderate by historical standards. Highway travel in the U.S. may reach 1.4 trillion miles for the season, up about 2.1% from last year."

EIA said that U.S. gasoline stocks are currently at the high end of the normal range, particularly on the East Coast, signifying an adequate supply situation overall.

"However, rising crude oil costs and refinery problems on the West Coast have pushed wholesale and retail prices up in recent weeks. Retail regular gasoline prices in California averaged $1.59/gal as of Apr. 5. This was 49¢/gal higher than the winter low of $1.10 seen in mid-February.

"The refinery problems are expected to be largely resolved before the summer is over, but not before transmitting extra price pressure elsewhere, as supplies from other U.S. regions and abroad are diverted to California. Because of the problems in California, summer prices are expected to peak at $1.18 in May, earlier than usual."

Crude prices

EIA said that the average cost to U.S. refiners for imported oil is expected to be about $15-16/bbl by December 1999, translating to about $18/bbl for West Texas intermediate. In 1999, EIA expects world petroleum demand to continue to increase while world oil production retreats, removing much of the excess accumulation of oil in storage that has been evident the past few years.

It said that world crude oil prices are expected to move close to $17/bbl by the end of 2000 ($19/bbl WTI), assuming that the recently announced cuts by the Organization of Petroleum Exporting Countries and others have a significant effect, and oil demand outside the major industrialized nations begins to grow after this year.

EIA said that, with continued strength in the economy, U.S. petroleum demand is expected to increase 2.6%, or 490,000 b/d, this year. Much of the growth is attributed to higher demand for heating fuel resulting in response to colder weather, and continued growth in transportation demand. It said that, in 2000, demand is expected to grow another 320,000 b/d, or 1.7%, assuming normal weather patterns and a slower overall economic growth rate.