WASHINGTON (April 25, 2008) — Record gasoline prices and a contracting U.S. economy will reduce summer gasoline demand for the first time in 17 years, according to the government's top energy forecasting agency.
U.S. gasoline prices will hit a monthly peak of just over $3.60 per gallon in June, helping to reduce motor fuel demand by 0.4 percent this busy driving season compared to last summer, said the federal Energy Information Administration (EIA).
In its summer forecast, EIA said gasoline demand will be 36,000 barrels per day (bpd) lower at 9.404 million bpd, the first summer decline since 1991.
Reuters reported that consumers will pay an average $3.54 a gallon during the summer driving season, which runs from April through September—up 61 cents from last year, according to the Energy Department's analytical and forecasting arm.
However, EIA cautioned that gasoline prices in some parts of the country “will cross the $4 per gallon threshold.”
“These retail price projections reflect higher prices for the refiner's average acquisition cost of crude oil, projected to average almost $97 per barrel, up from about $67 per barrel last summer,” the agency said.
For May and June alone, EIA said the average price for U.S. oil was expected to be about $103 per barrel.
The price of crude accounts for about 70 percent of the cost of making gasoline.
The national price for regular, self-service gasoline hit a record $3.33 a gallon in the first week of April, according to EIA.
Truckers will suffer the most at the pump, with the diesel fuel price forecast to average $3.73 a gallon this summer, up 88 cents from last year. EIA expects the monthly price for diesel will peak in April at about $3.90 a gallon.
High gasoline prices are cutting into the extra money consumers have to spend on other goods and services, hurting the overall U.S. economy.
EIA expects the U.S. economy to decline in the first half of this year and then improve, ending 2008 with annual growth of 1.2 percent, the lowest rate since 2001.
The agency noted the economic stimulus checks the government will start sending out in May “are expected to boost real disposable income but are not expected to have a significant impact on motor gasoline consumption.”
Gasoline prices will hit record levels, even though there will be plenty of fuel supplies.
Gasoline inventories at the April 1 start of the summer driving season were estimated to be 224 million barrels, up 23 million barrels from a year ago and the highest in 15 years.
Domestic gasoline production is forecast to be 20,000 bpd lower, or 0.2 percent less, this summer at 8.241 million bpd, while ethanol output is estimated to be 133,000 bpd higher, or 32 percent more, at 551,000 bpd.
Because of high inventories and lower demand, U.S. imports of summer gasoline are expected to be 91,000 bpd less, or down 7.8 percent, at an average 1.074 million bpd, the EIA said.