EIA expects stable gasoline prices, higher heating costs this winter

Dec. 13, 2002
In its latest monthly forecast, the US Energy Information Administration predicted gasoline prices will be stable this winter but heating fuels may be higher than last year.

By OGJ editors
WASHINGTON, DC, Dec. 13 -- In its latest monthly forecast, the US Energy Information Administration predicted gasoline prices will be stable this winter, but heating fuels may be higher than last year.

Assuming normal temperatures through the rest of the heating season, EIA expects consumers will pay 31% more for natural gas compared with last winter. Costs may also climb 41% for heating oil, 17% for propane, and 13% for electricity, officials said.

The agency cautioned, however, that its estimates "might be on the high side" because El Niño effects could reduce retail prices by 5-10%. Average natural gas wellhead prices are projected to be $2.95/Mcf in 2002 and $3.69/Mcf in 2003. In first quarter 2003, EIA projects natural gas wellhead prices will be $4.16/Mcf, officials predicted.

Gasoline steady
Assuming crude oil prices stay within expected levels, "we can expect fairly stable motor gasoline prices through March," EIA said. "In April, gasoline prices should begin their seasonal climb, peaking at around $1.46/gal (retail) by May or June."

The agency's base case assumes that imported crude will cost refiners on average $23.73/bbl in 2002 and $23.94/bbl in 2003. The average spot price for West Texas Intermediate is expected to be $25.93/bbl in 2002 and $25.86/bbl in 2003.

Nearer term, the agency projects that crude imports will average $25.24/bbl and WTI will cost about $27.12/bbl in first quarter 2003. EIA also assumes that the Organization of Petroleum Exporting Countries keeps its target price in the $22-$28/bbl range and that the US economy grows by a 3% annual rate next year.

"Refiner margins (the difference between the refiners' selling price for gasoline and their acquisition costs for crude oil), which were weak this past summer, are expected to stabilize rather than decline through the heating season as inventories of gasoline are slipping below recent averages," said EIA officials. They expect refiner margins to recover to more normal levels during the next driving season.

EIA noted that average crude prices fell by $2.50/bbl during October and November in response to continued high production levels from OPEC-10 countries. However, by the end of November, oil prices had risen to end-October levels as concerns over the situations in Iraq and Venezuela pushed prices up.

US oil supply
Average US oil production is expected to show a very slight decline of 0.1% in 2002 to 5.8 million b/d. For 2003, a 3.5% drop is expected, resulting in an annual production rate of 5.6 million b/d.

Lower 48 states' oil production is expected to decrease by 179,000 b/d to a rate of 4.63 million b/d in 2003, EIA said. Shell's Brutus platform is expected to reach peak production at 100,000 b/d in 2002. Oil production from the Mars, Ursa, Dianna-Hoover and Brutus federal offshore fields is expected to account for about 10.7% of continental US oil production by 4th quarter 2003.

In Alaska, production is expected to fall 2.1% in 2003 although some new production is anticipated. Facilities expansion in the new satellite Colville River (Alpine) field, for example, will eventually add 60,000-70,000 b/d. Another satellite field, North Star, came on in November 2001 and is currently producing at a rate of over 60,000 b/d, EIA noted. Production from the Kuparuk River field, plus like production from the West Sak, Tabasco, Tarn and Meltwater fields, is expected to stay at an average of 215,000 b/d in the 2002 and 2003 forecast periods.