EIA Reports

U.S. DEPARTMENT OF ENERGY
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
APRIL 8, 2002

Summer 2002 Gasoline Prices Expected To Be Lower Than Last Summer

Gasoline pump prices for spring and summer 2002 are expected to average $1.46 per gallon, 8 cents lower than last year's average of $1.54 per gallon. In general, motor gasoline market conditions in the United States are less tight at the beginning of the driving season this year than they were in 2001. However, sharply higher crude oil prices since the end of 2001 and tightening oil markets worldwide have moved gasoline prices up rapidly this spring from winter lows, according to forecasts released today by the Energy Information Administration (EIA) in the April Short-Term Energy Outlook.

U.S. crude oil and gasoline inventories are now above last year's levels but are expected to decline to less ample levels through the summer and into the fall. U.S. motor gasoline inventories were 8.8 percent (17 million barrels) above year-ago levels at the end of March. Even with a greater inventory cushion this year at the start of the driving season, the summer average for nominal pump prices is expected to be the third highest on record, after 2001 and 2000. Adjusting for inflation, the all-time record summer gasoline price was recorded in 1980, when it was $2.65 per gallon in 2001 dollars.

Average gasoline prices will most likely remain below the 2001 average for the driving season, but there is a slight possibility that they could be higher than last summer's levels, especially if refining problems develop or the crude oil market becomes more tight.

Other highlights for the Short-Term Energy Outlook include:

• Average crude oil prices moved up rapidly in March to $24.50 per barrel from the average February level of $20.75 per barrel for West Texas Intermediate (WTI). The average WTI price for 2002 is now projected at about $25.00 per barrel. Continued strong compliance by the Organization of Petroleum Exporting Countries (OPEC) producers to current quotas and continued economic recovery in 2002 are important factors in our forecast for oil prices this year. Questions about the extent of the non-OPEC production response, worldwide economic strength and other factors result in uncertainty concerning potential oil prices over the next 7 quarters.

• Domestic dry natural gas production is projected to fall by about 4.7 percent in 2002 compared to the 2001 level. Natural gas storage levels are projected to end the heating season (March 31) at 1,569 billion cubic feet (bcf), more than double the 742 bcf seen at the same time last year. Despite rising demand stemming from lower relative natural gas prices, particularly in the industrial and electricity generating sectors, there is a strong possibility of spot gas prices slipping to about $2.40 per thousand cubic feet (mcf) by mid-summer from the current range of over $3.00 per mcf. Depending on weather and overall market conditions, natural gas prices are expected to range between $2 and $3 per mcf for most of the year, with higher ranges likely entering the next heating season.

• This summer, total electricity demand (retail sales plus industrial generation for own use and other direct sales) is expected to be nearly level with last summer's demand due to both weather and economic factors. Total annual electricity demand growth is estimated to have been a negative 0.7 percent in 2001, but is expected to begin to revive slightly in 2002, and to grow by 3.2 percent in 2003. Mid-winter heating demand and a solid recovery in the industrial sector are expected to yield higher growth in 2003.

The Short-Term Energy Outlook is published monthly on EIA's Internet Web site. Users can view and download the forecast analysis, tables and charts by going to the EIA Home Page at http://www.eia.doe.gov and selecting "Short-Term Outlook" from the right menu under Featured Topics. The Internet address for direct access to the Outlook is: http://www.eia.doe.gov/emeu/steo/pub.