EIA’s projected average for regular this summer: $3.02 per gallon

The summer-season retail price of regular gasoline is projected to average $3.02 per gallon, up 18 cents per gallon from last summer, according to the Short-Term Energy Outlook released July 10 by the Energy Information Administration (EIA). mp1

Here are selected highlights from the Outlook:

As of early July, the average price of retail gasoline in EIA’s weekly gasoline price survey has declined by more than 25 cents per gallon from the record nominal price of $3.22 per gallon on May 21. The resolution of many refinery problems that occurred earlier in the season and higher levels of product imports helped bring prices down.

Average monthly retail regular-grade motor gasoline prices are expected to increase modestly over the next few months, averaging $3.00 in July and $3.07 per gallon in August. This is due to the combination of rising crude oil prices, strong demand for gasoline, and low gasoline inventories. The new price projections for July and August are 4 to 5 cents per gallon below those included in the June Outlook.

The projections reflect continued tightness in world oil markets. In 2007, the refiner acquisition cost (RAC) of crude oil is projected to average $62.35 per barrel, higher than the $60.23 per barrel average in 2006. The tight world oil supply/demand balance, which is responsible for the rising crude oil prices, is expected to continue in 2008, boosting the annual average RAC price by another $1.60 per barrel. West Texas Intermediate (WTI) crude oil prices are projected to average $65.56 per barrel for 2007 and increase to an average of $66.92 per barrel in 2008.

In a section on U.S. petroleum markets, the EIA reported the following:

Total domestic petroleum consumption is projected to average 20.9 million bbl/d in 2007, up 1.4 percent from the 2006 average. In 2008, consumption growth is projected to moderate to 1.2 percent, to an average of 21.1 million bbl/d. Summer motor gasoline consumption is projected to average 9.5 million bbl/d, up 1.2 percent from last summer’s average.

In 2007, domestic crude oil production is projected to average 5.2 million bbl/d, up 0.6 percent from 2006 production levels. EIA’s projections assume a hurricane-related outage of about 13 million barrels for the Gulf of Mexico between now and October. Domestic production is also projected to increase by 3.5 percent in 2008, averaging 5.3 million bbl/d. Contributing to the increases in output are the Atlantis deepwater platform, which is expected to come on-stream later this year, and the Thunderhorse platform, expected to come on-stream late in 2008.

Motor gasoline inventories during the first half of the summer (April-June) were tight and are expected to remain so during the rest of the season. At the end of June total gasoline inventories were 205 million barrels, 8 million barrels below the average of the previous 5 years. The low-inventory situation is expected to persist, with end-of-season (September 30) stocks at 198 million barrels, 7 million barrels below the previous 5-year average and 17 million barrels below last year. The inventory situation, combined with continued demand growth, is expected to contribute to refinery margins higher than those of the previous summer season.

Crude oil prices, which have been rising over the last 2 months, are expected to reach a peak monthly average price in August before starting to ease slightly. In 2007, the average refiner acquisition cost (RAC) of crude oil is projected to be $62.35 per barrel, higher than the $60.23 per barrel average in 2006. The main reason for this increase, the tight world oil supply and demand balance, is expected to continue next year, with a projected average 2008 RAC price of $63.92 per barrel. WTI prices are projected to average $65.56 per barrel in 2007, and increase to an average of $66.92 in 2008.

The next Short-Term Energy Outlook is due to be released Aug. 7.