ACHRNEWS

April 16, 2007: Energy Prices to Remain Elevated as Summer Approaches

April 16, 2007

WASHINGTON - Crude oil prices are expected to average $65 per barrel this summer, and that, along with demand growth and supply constraints, will keep prices for gasoline and natural gas elevated, according to the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA).

The EIA's latest Short-Term Energy Outlook notes that U.S. retail gasoline prices increased by more than 60 cents per gallon over the past two months due to higher crude oil prices, unplanned refinery outages, increased demand for gasoline, and low levels of gasoline imports from Europe. The average monthly gasoline pump price is projected to peak at an average of $2.87 per gallon in May while averaging $2.81 per gallon over the course of the summer. With a tight supply situation and disruptions at its refineries, California has borne the brunt of the highest gasoline prices, spiking above $3 per gallon in mid-March. West Coast retail prices for regular gasoline are projected to average $3.07 per gallon this summer. Average retail prices for diesel fuel are expected to average $2.82 per gallon over the summer, up from a winter low but down 6 cents compared to last summer.

Natural gas actually experiences two peaks in demand: a winter peak caused by home heating, and a summer peak caused by gas-fueled power plants being placed online to meet demands for air conditioning. With oil prices high and the demand for natural gas increasing as the summer cooling season starts, the EIA projects rising natural gas prices this summer. The spot price for natural gas is expected to average $7.83 per thousand cubic feet this year - an 89 cent increase from last year - and average $8.11 per thousand cubic feet in 2008. But the EIA adds a caveat to its projections, warning that "petroleum prices are subject to significant volatility, particularly when markets are tight and tensions in oil exporting nations deepen."

Publication date: 04/16/2007