EIA says US gasoline prices may peak this month
With no further major refinery problems, record high retail gasoline prices may peak this month, the US Energy Information Administration told a House subcommittee Tuesday. EIA's latest forecast was that monthly average prices would peak between $1.65 and $1.75/gal.
By the OGJ Online Staff
WASHINGTON, DC, May 15 -- With no further major refinery problems, record high retail gasoline prices may peak this month, the US Energy Information Administration told a House subcommittee Tuesday.
"Our latest forecast has monthly average prices peaking somewhere between about $1.65 and $1.75/gal," said John Cook, EIA's petroleum division director told the House Subcommittee on Energy and Air Quality. "However, we are projecting continued low inventories, which, along with other factors, keeps us exposed to further volatility, particularly during summer when demand peaks," Cook cautioned.
The subcommittee hearing received testimony from government officials and retail groups about the impact of higher energy costs on the economy.
Cook noted that gasoline prices surged in April and early May, rising nationally 31¢/gal to reach $1.71 on May 14. Some consumers have experienced even higher increases. And like last year, some of the largest increases have been in the Midwest.
Yet, there is no single factor causing today's price surge, EIA said. "The root of the problem is the tight world crude oil market. This tight market brings low inventories and an increased potential for volatility. But the apparent increase in volatility seen recently is not only a function of the tight crude oil market's low inventories, but also of the loss of flexibility due to refinery capacity and distribution constraints brought about by growing demand and product proliferation," Cook said.
"We are passing through what usually is one of the tightest times of year for the gasoline market -- when refineries finish maintenance as demand is increasing. Production has increased almost 650,000 b/d since the end of March as refineries ramp up to full capacity."
EIA said natural gas prices are also a concern. Spot prices this summer are expected to average $5/MMbtu, or about twice what consumers experienced two summers ago.
Cook said next year should be better. "We expect the storage situation to improve somewhat, and with that, we should see a dip in average gas prices."
However, in the short term, increases in production and imports will be pressed to keep pace with growing demand, partially due to gas-fired electric generation.