|
Press Releases | |
|---|---|
EIA ReportsU.S. DEPARTMENT OF ENERGY Forecasts Lower Prices to Continue through Labor Day In a report released today, the U.S. Energy Information Administration has concluded both the gasoline price spikes in the spring of 1996 and the relatively lower prices in the spring of this year are explained largely by markets in crude oil and normal seasonal behavior. The study, Motor Gasoline Assessment Spring 1997, also revisits EIA's earlier motor gasoline projections, showing that under current market conditions, lower retail gasoline prices are likely to continue through the rest of the summer driving season (Labor Day). Retail motor gasoline prices (average all types-all services) appear to have peaked in January of this year at $1.32 per gallon. They have been sliding downward slowly through the summer with prices declining about 7 cents per gallon on average by July. (Last year, prices jumped 19 cents per gallon between January and June, before receding through the summer.) Prices are expected to continue to dip slightly through the end of the year as long as crude oil prices are calm. (A large sustained increase in crude oil prices would ultimately be passed on to motorists.) Motor gasoline prices are projected to rebound by 5 cents per gallon next spring as the driving season begins. (The full August 1997 update to EIA's Short-Term Energy Outlook will be released on August 6, 1997, and will be available electronically on EIA's World Wide Web Site at: http://www.eia.doe.gov/emeu/steo/pub/contents.html.) Gasoline prices drew much public attention in the spring of 1996, as regular conventional gasoline climbed 19 cents, from $1.06 in mid-February to a peak of $1.25 in mid-May. A year later, prices reversed during the same time frame, falling from $1.23 in early January to $1.17 in mid-May. EIA explored the reasons behind these contrasting price changes. Crude oil prices responded to shifting world petroleum supply-demand balances between 1996 and 1997. During the first quarter 1996, world petroleum supply growth was lower than expected, in part because Iraq's re-entry into the market was delayed. World demand for petroleum was high due to an unusually cold winter in the Northern hemisphere. Crude oil buyers expected new production to bring lower prices, which added a disincentive to build stocks. Winter petroleum stock draws were heavy worldwide, and a late cold snap in both Europe and the United States drove petroleum demand and crude oil prices up just when gasoline prices are normally rising in early spring. The normal seasonal increase in gasoline prices combined with the increase in crude oil prices explained most of the strong price increase in 1996. Although crude oil and gasoline prices fell back somewhat over the summer of 1996, seasonal demand increases pushed world crude oil prices upward in the fourth quarter. The 1997 winter was warmer than normal, and with the arrival of new crude oil supplies from Iraq and other countries, the petroleum supply-demand balance weakened. Initial estimates are that world petroleum production exceeded demand in first quarter 1997, just the opposite of the normal supply-demand pattern. Crude oil prices fell in 1997 from January into early April, more than offsetting the normal seasonal gasoline price increase. Retail gasoline prices declined 6 cents per gallon from January through May. As a result of the lower crude oil prices, EIA expects gasoline prices to remain below those of last year during the remainder of the summer driving season. Other findings in the report address a number of gasoline market issues that surfaced over the past year, including: A statistical analysis of the speed with which gasoline prices seem to travel through the distribution system -- In general, EIA found that about 45 percent of the spot price of gasoline is passed through to the retail level within 4 weeks, with an additional 30 percent pass-through occurring in 4 weeks. The report explores this phenomenon for the Midwest, Northeast, Mid Atlantic, South Atlantic and Gulf Coast regions. Changes in the sources of gasoline supply during 1996 and 1997 -- Imports in 1996 and early 1997 were very high, with much of the growth stemming from an increase in imports of blending components rather than finished products. It appears these blending components are being used to produce reformulated gasoline for Eastern U.S. markets. The high level of imports allowed U.S. refiners to keep gasoline yield from crude oil much lower than normal during the first part of 1997 and to continue producing distillate fuels. The unusual price pressures experienced by California -- In spring 1996, California introduced its own reformulated gasoline (CaRFG), which has better environmental qualities than Federal reformulated gasoline (RFG), but is more expensive than RFG to produce (5 to 8 cents per gallon). California has been struggling to maintain a stable supply-demand balance. In both 1996 and 1997, spring supply problems caused CaRFG prices to increase much more than prices in other parts of the country. And yet, during the fall of 1996, an excess of production caused CaRFG prices to plummet below conventional gasoline prices in the rest of the United States for a while. Copies of Motor Gasoline Assessment Spring 1997 are available from the U.S. Government Printing Office or through EIA's National Energy Information Center (NEIC), Room 1F-048, Forrestal Building, 1000 Independence Avenue, SW, Washington, DC, 10585, 202/586-8800. The report is also available electronically in portable document format (pdf) on EIA's Web Site. Go to: http://www.eia.doe.gov/fuelpetroleum.html. Then scroll down to the publication title under the "Other" category. Or, go directly to the report at: ftp://ftp.eia.doe.gov/pub/pdf/Petroleum.Marketing.Monthly/gasass2.pdf.
EIA Press Contact: Thomas Welch, 202/586-1178 EIA-97-16 Contact:
|