ACHRNEWS

June 16, 2008: Gasoline Prices Not Expected to Peak Nationally Until August

June 16, 2008

WASHINGTON - The national average price for regular gasoline in the United States is now greater than $4 per gallon and is projected to keep climbing until August, according to the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA). The EIA’s Short-Term Energy Outlook expects the average price of regular gasoline to peak at $4.15 per gallon, although some areas have already seen prices that high, and to average $3.78 per gallon for the year.

Diesel fuel prices are projected to remain near the June 2 price of $4.71 per gallon over the next few months, with an average price of $4.32 per gallon for the year. Spot prices for natural gas are also up, at $11.65 per thousand cubic feet (Mcf), a rise of $1.16 per Mcf from the average spot price in April. The spot price is expected to average $11 per Mcf for the year. And with fuel prices up, electricity prices are also expected to increase by about 3.7 percent in 2008 and another 3.6 percent in 2009.

The main driver for all these increased prices is the cost of crude oil, which surged to prices approaching $140 per barrel in the first half of June. With the combination of strong demand and tight supply expected to continue, the EIA now projects average crude oil prices of $122 per barrel in 2008 and $126 per barrel in 2009. This represents a shift in thinking, because until now, the EIA has always forecasted a drop in crude oil prices in 2009.

In fact, last month’s outlook projected average crude oil prices of $110 per barrel in 2008 and $103 per barrel in 2009. The difference is caused by lower expectations for increased oil supplies, as oil production from countries outside of the Organization of the Petroleum Exporting Countries (OPEC) is currently lower than last year. Meanwhile, nearly all the surplus production capacity is located in Saudi Arabia.

Publication date: 06/16/2008