ACHRNEWS

July 14, 2008: No Gasoline or Oil Price Relief Expected Until Winter 2009

July 14, 2008

WASHINGTON - The average price of regular gasoline is expected to remain greater than $4 per gallon until the fourth quarter of 2009, according to the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA).

The EIA’s Short-Term Energy Outlook notes that crude oil spot prices reached $145 per barrel on July 3, and crude oil prices are now projected to average $127 per barrel in 2008 and $133 per barrel in 2009. Despite the higher prices, world oil consumption continues to grow, while production increases have fallen short of expectations.

With crude oil prices staying high, the EIA now projects that the average price for regular-grade gasoline will stay well above $4 per gallon for the rest of the year, causing the average for 2008 to end up at $3.84 per gallon, an increase of more than a dollar per gallon above last year’s price. That trend will continue in 2009, with an average price of $4.06 per gallon for regular gasoline. Diesel fuel prices will also stay elevated, averaging $4.35 per gallon in 2008 and $4.48 per gallon in 2009.

While the nation is currently focused on the high price of gasoline and diesel fuel, by this winter the focus may well change to electricity and heating fuels. The EIA notes that the sustained high prices for petroleum, along with other factors, are pushing up the spot price of natural gas. The spot price is projected to average $11.86 per thousand cubic feet (Mcf) in 2008 and $11.62 per Mcf in 2009, a 65 percent increase over the $7.17 per Mcf average spot price in 2007. Utilities and gas distribution companies tend to sign long-term contracts for natural gas, so spot prices aren’t necessarily reflected immediately in the prices paid by businesses and homeowners, but they do indicate the trend in prices. The trend is already apparent in the electricity market, where prices are projected to increase 5.2 percent in 2008 and 9.8 percent in 2009.

Publication date: 07/14/2008