EIA: monthly average gasoline price to peak near $3.40 this spring

Retail prices for petroleum products are expected to be higher in 2008 than last year, due to higher average crude oil prices, according to the Feb. 12 Short-Term Energy Outlook, issued by the Energy Information Administration (EIA).

Both motor gasoline and diesel prices are projected to average more than $3 per gallon in 2008, according to the EIA report. The monthly average gasoline price is projected to peak near $3.40 per gallon this spring.

Other highlights:

The outlook over the next two years points to an easing of the oil market balance in 2008. Higher production outside of the Organization of the Petroleum Exporting Countries (OPEC) and planned additions to OPEC capacity should more than offset expected moderate world oil demand growth and relieve some of the tightness in the market.

Surplus production capacity is projected to grow from its current level of less than two million barrels per day (bbl/d) to more than four million bbl/d by the end of 2009. This balance suggests some price softening, although delays or downward revisions in capacity additions in both OPEC and non-OPEC nations could alter the outlook, as could OPEC production decisions.

The spot price of West Texas Intermediate (WTI) crude oil averaged $93 per barrel in January 2008 and is expected to average $87 in February. The WTI price, which averaged $72 per barrel in 2007, is expected to average about $86 per barrel in 2008 and $82 in 2009.

The Feb. 12 Outlook also reported that total U.S. petroleum consumption is expected to increase by 140,000 bbl/d, or 0.7 percent, in 2008, while real gross domestic product (GDP) is expected to grow by 1.6 percent. If economic growth in 2008 is less than expected, petroleum consumption would also likely be lower than projected.

The next EIA Outlook is due to be released March 11.

Here are further excerpts from the Feb. 12 report:

Total petroleum consumption in the U.S., averaged 20.7 million bbl/d in 2007, up 0.2 percent from 2006. Projected consumption growth in 2008 was lowered from about 230,000 bbl/d in last month’s Outlook to 140,000 bbl/d in this forecast. Based on current weather projections and forecasts of an economic slowdown this year, distillate fuel consumption growth is projected to slow from 1.5 percent in 2007 to 0.8 percent in 2008 before accelerating to 1.6 percent in 2009. Gasoline consumption is expected to exhibit annual average growth of about 0.7 percent during the next 2 years.

In 2007, domestic crude oil output is estimated to have averaged 5.1 million bbl/d, unchanged from 2006, and is projected to remain unchanged in 2008. Growth in output in the Federal Gulf of Mexico, where the Atlantis deepwater platform began production in late 2007, is projected to offset declines in Alaska and the lower 48 states in 2008. In 2009, output is projected to grow by 6.2 percent, or about 320,000 bbl/d, mainly because of the start-up of the Thunder Horse and Tahiti platforms in the Gulf of Mexico and a small decrease in onshore production brought about by continued high crude oil prices.

WTI crude oil prices, which averaged $72.32 per barrel in 2007, are projected to average $86.46 and $81.67 per barrel, respectively, in 2008 and 2009. Regular grade gasoline prices, which averaged $2.81 per gallon in 2007, are projected to average $3.07 and $2.97 per gallon, respectively, in 2008 and 2009. Diesel fuel prices, which averaged $2.88 per gallon last year, are projected to average $3.21 and $3.08 per gallon, respectively, in 2008 and 2009.

Total end-of-January motor gasoline inventories are estimated to have been 227 million barrels, similar to last January, but 9.1 million barrels above the five-year average. At the onset of the peak driving season (March 31), total gasoline stocks are projected to be 218 million barrels, 16.3 million barrels above last year and 12.5 million barrels above the five-year average.