EIA predicts only slight increase at the pump
Gasoline prices are expected to rise just modestly this summer — and remain far below last year’s levels — as the recession continues to put a lid on energy demand.
Regular gasoline in the Midwest will average $2.21 a gallon from April through September, according to the Energy Information Administration’s annual fuels forecast for the six-month summer driving season. That’s 30 cents more than the year-to-date average; but it’s a bargain compared with last summer’s $3.77.
If accurate, the forecast means filling up a Toyota Camry would cost about $30 less than it did last summer. The owner of a Ford F-150 pickup would pay $40 less.
The primary reason for the drop: Cheaper crude oil — the principal feedstock for gasoline.
The price of benchmark West Texas Intermediate crude oil is expected to average about $53 a barrel in 2009, which is about half of last year’s average oil price and just a fraction of the record $147-a-barrel seen last July.
Tuesday’s average retail gas price was $1.94 a gallon in the city of St. Louis and surrounding Missouri counties, according to AAA. In the Metro East, where taxes are higher, the average is $2.09.
Prices have been rising slowly since the beginning of the year, tracking the slow increase in crude oil. But analysts don’t see a return to $4 gas anytime soon.
"Based on everything we’re looking at now, odds are that gasoline prices will be at best marginally higher than they are now," said Bill O’Grady, Chief Market Strategist at Confluence Investment Management LLC in Webster Groves.
Crude oil inventories are unusually high for this time of year, and gasoline supplies are ample given projections for demand fast cash advance. Just as importantly, only about 80 percent of the nation’s refining capacity is being used, so there’s still ample cushion should unplanned outages occur, O’Grady said.
The EIA, the statistical arm of the U.S. Energy Department, estimates oil consumption will decline 2.2 percent this year because of the recession. That’s on top of last year’s 6.1 percent drop thanks in part to a deteriorating economy that eroded demand in the fall.
Demand for gasoline is expected to rise slightly during the summer driving season compared with last year when soaring pump prices and hurricane-related distribution problems led to a steep decline in fuel use.
Prices of crude oil and gasoline could climb more quickly than forecast if stimulative programs put in place in the U.S. and elsewhere revive the global economy more quickly than anticipated, the EIA said.
Even if that happens, it’s uncertain how quickly gasoline consumption would rebound.
A survey of AAA members in January showed that 36 percent planned to make fewer driving trips this year, compared with just 14 percent who planned more trips, said Mike Right, a AAA Missouri spokesman.
The Federal Highway Administration reported last month that Americans traveled 7 billion fewer vehicle-miles in January compared with a year earlier, despite lower gas prices.
"I think that we’ve seen some major shifts in personal diving habits brought on by the high cost of gasoline and the general state of the economy," Right said.