In its Short-term Energy Outlook released last week, the Energy Information Administration edged higher its expectations for retail gasoline and diesel fuel prices for 2010 from its projection in December. Triggering the revision were estimates for higher crude prices than previously expected, with the agency saying that the U.S. gasoline average will likely top $3 gal at some point during upcoming spring and summer.
The EIA, which is the statistical division of the Department of Energy, expects a $2.84 gal U.S. average for regular grade gasoline in 2010, up 1.0cts from December estimates and nearly 50cts above the 2009 average. For 2011, the agency expects retail regular grade gasoline to average $2.96 gal.
As a result of increasing growth in motor gasoline consumption, the difference between the average gasoline retail price and the average cost of crude oil widens this year before starting to level out in 2011 said analysts with the agency.
The U.S. average for retail diesel fuel, which averaged $2.46 gal in 2009, is expected at $2.98 gal in 2010, up 2cts from prior month estimates. For 2011, the agency projects retail diesel prices to average $3.14 gal.
The EIA also said that West Texas Intermediate crude oil, the U.S. benchmark, will average about $80 bbl in 2010 and $84 bbl in 2011, as gross domestic product climbs 2.0 percent and 2.7 percent, respectively. World oil-consumption-weighted real GDP is expected to grow by 2.5 percent and 2.7 percent in 2010 and 2011, respectively.
The world oil market should gradually tighten in 2010 and 2011, the agency stated, provided the global economic recovery continues as projected.
WTI crude oil spot prices averaged $74.50 bbl in December 2009, said the EIA, about $3.50 bbl lower than the prior month’s average. The decline reflected weakness during the first two weeks of the month, with the WTI spot price falling from $78 to $70 bbl.
“However, colder-than-normal weather and U.S. crude oil and product inventory draws that exceeded the December five-year averages helped push the WTI spot price back up to $79 bbl by the end of the month,” said EIA.
WTI spot prices are forecast to weaken over the next few months, averaging $76 bbl in March before rising to about $82 bbl in late spring and to $85 bbl by the beginning of next winter.
Data shows liquid fuels consumption declined 810,000 bpd or 4.2 percent in 2009, with motor gasoline the only major petroleum product whose consumption did not decline, having increased a scant 0.1 percent. EIA projects total petroleum products consumption will rise by 210,000 bpd this year or 1.1 percent due to a moderate economic recovery that began in late 2009. All major products contribute to that increase, with EIA reporting consumption of motor gasoline rises by 50,000 bpd or 0.6 percent. The projected continuing economic recovery in 2011 boosts total petroleum products consumption by 220,000 bpd, with both motor gasoline and distillate consumption up by about 70,000 bpd in 2011.
Domestic crude oil production averaged 5.31 million bpd in 2009, up 360,000 bpd from 2008. The forecast growth in domestic output slows in 2010 with an increase of 130,000 bpd and then declines slightly by 20,000 bpd in 2011. Ethanol production continues to grow to meet the volume requirements of the Renewable Fuel Standard. Projected ethanol production, which averaged 690,000 bpd in 2009, increases to an average of 790,000 bpd in 2010 and 840,000 bpd in 2011.
