Gasoline price relief to be 'limited' this summer, EIA says

By OGJ editors

HOUSTON, Apr. 8 -- US retail gasoline prices are expected to average $1.56/gal during April-September according to the latest short-term energy outlook released Tuesday by the Energy Information Administration.

EIA's projected price is 17¢/gal higher than last summer's average, but in line with average summer prices in 2000 and 2001, it reported. The projection, however, falls far short of the summer, 1980, all-time high of $2.77/gal adjusted for inflation and expressed in 2003 dollars.

"Because of uncertainties inherent in world oil markets and (US) refinery and distribution systems, prices as (high) as 16¢/gal above or below the projected summer average fall within the 95% confidence interval for the forecast," EIA said.

Such uncertainties include possible relief for higher prices due to some gasoline cargoes reportedly now en route to the US from Venezuela. Alí Rodríguez Araque, president of Petroleos de Venezuela SA, announced eight shipments of Venezuelan crude soon would be exported to US markets, according to El Nacional newspaper in Caracas (OGJ Online, Apr. 8, 2003).

Also, Rodríguez was reported as saying Monday that the company may lift the remainder of its products force majeure once a 60,000 b/d flexi-coker unit is restarted at that country's 940,000 b/d Paraguana refinery complex, according to Caracas-based online oil newsletter Petroleumworld. The Paraguana complex is a major supplier of petroleum products to the US.

Escalation causes
Higher oil prices, lower gasoline inventories, and growing gasoline demand all will contribute to the increase in gasoline prices this year, EIA continued. "Gasoline inventories totaled 200 million bbl at the end of March, about 13 million bbl below last year at the same time, and 6 million bbl above the recent low seen in 2001," it said, adding, "The inventory situation is expected to worsen somewhat by the end of the current quarter as gasoline demand begins to increase."

EIA also said that higher average gasoline refiner margins are expected to be the rule rather than the exception through most of the driving season. These higher margins "will add to wholesale and retail price pressures above those stemming from high crude oil prices," EIA reported.

"Nevertheless," said EIA officials, "under the assumptions that neither the war in Iraq nor the conflict in Nigeria generates losses to world oil supply that are not made up by other suppliers, crude oil prices and gasoline pump prices should ease gradually as the summer progresses. The average pump price in the third quarter. . .is expected to be about 10¢/gal below the second-quarter average."

Furthermore, this rise in retail gasoline prices over last summer, EIA forecast, will have a detrimental effect on US motor fuel demand. "Motor gasoline demand is projected to increase by 1.6% this summer, reflecting average growth of 1.3% in vehicle miles traveled and continued losses in fleet-wide fuel efficiencies brought about by continued consumer preference for large vehicles. The 5-year average for summer gasoline demand growth is 1.9%," EIA said.