The national average price of regular motor gasoline is expected to run about $1.46 per gallon at the pump this summer, according to the motor gasoline outlook published in the Energy Information Administration's (EIA's) April Short-Term Energy Outlook (STEO). That price is lower by about 8 cents per gallon than last summer's average. Although crude oil prices have risen recently, they remain lower than prices a year ago and are expected to remain so through most of the summer.

Shifting world petroleum supply and demand patterns and/or other unforeseen developments could influence the price, and STEO accommodates this uncertainty by generating a probable price range forecast (see figure). According to EIA estimates, there is a 95-percent likelihood that the national average retail price for a gallon of regular gasoline will lie between $1.36 and $1.57 this summer, and consequently a 5-percent probability that it will fall outside that range. Average prices will vary regionally, however, due to differences in tax rates, environmental requirements, and market circumstances.

Historical and Projected Retail Motor Gasoline Prices, 1999-2002 (Cents per Gallon)

Note: Prices are for regular gasoline, self-service cash. Source: Energy Information Administration.

Nationwide gasoline inventories stood at 211 million barrels at the start of the driving season, about 8 percent higher than at the same time last year. Stocks are higher than a year ago in all regions of the country, although the difference is small in the West Coast region and it is possible that the high price volatility witnessed there in recent years will recur this summer. On the other hand, the price volatility seen in the Midwest in the last 2 years may be mitigated this year by the 11-percent increment in midwestern stocks compared with last season.

Despite the still relatively weak economy, total gasoline demand is expected to grow 1.6 percent this summer, about average for the last 5 years but double the average for the last 2 years. The inflation-adjusted cost of driving a mile is expected to be about 9 percent below the summer 2001 average, which should boost highway travel somewhat. Total demand is expected to reach 8.9 million barrels per day.

The system's ability to supply adequate quantities of motor gasoline has caused concern in previous driving seasons. In 2000, more stringent pollution-control requirements triggered price jumps in the Midwest early in the driving season as supplies tightened in response to problems in transporting and blending ethanol.

In 2001, the season began with stocks at a record low, which caused alarm and raised prices in the Midwest (because of the previous summer's experience) and on the West Coast (where prices are usually higher and more unstable anyway because of its relative isolation from the major refining and distribution complexes on the Gulf Coast).

For the 2002 summer driving season, initial supplies are expected to be less constrained than in the previous 2 years. Moreover, refinery utilization rates have been relatively low because of a sharp drop in jet-fuel requirements since September 11, warm weather, and the weak economy, leaving ample capacity to meet gasoline demand. The average refinery utilization rate is projected to be about 93 percent, the lowest summer average in 9 years, while motor gasoline yields should average a record 47 percent.

Strong inventories and refinery output will probably reduce motor gasoline net imports this summer, though they will remain high by historical standards. STEO projections put net imports in 2002 at 560,000 barrels, down by about 90,000 barrels from last year.

Summer 2002 Motor Gasoline Outlook is a special report in EIA's April 2002 Short-Term Energy Outlook, and is available only on the EIA website.

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File last modified: April 25, 2002