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U.S. ENERGY INFORMATION ADMINISTRATION EIA Sees Lower Gasoline Prices Continuing Despite Rise in Summer Gasoline Demand The Energy Information Administration (EIA) says that motor gasoline demand has been gaining strength in recent weeks. Summer gasoline demand this year is expected to be about 2 percent above 1996 levels. The current monthly update to the EIA's Short-Term Energy Outlook (now available on Internet) reports an estimated 1.3 percent year-to-year growth rate for the second quarter of this year. EIA forecasts a demand increase of 2.6 percent for the third quarter. With demand picking up, stocks have dropped below their comparable 1996 levels and they are expected to remain relatively low throughout the remainder of this year. Even so, EIA expects gasoline prices to remain below last year's levels through the remainder of the summer driving season. Despite current demand strength and recent upturns in oil spot prices, EIA has lowered its expectations of average world oil price projections from last month by about $1 per barrel through 1998. OPEC production strength, a slight increase in expected oil output from Latin America (i.e. Colombia), and the prospects for additional excess world oil stocks in the near term are expected to hold prices in check. The projection also assumes that Iraq resumes oil exports, which have been interrupted since early June. For a limited period of time, these exports may reach a rate of as much as 1.4 million barrels per day, but by September Iraqi exports would probably add about 750,000 barrels per day to world supply. The third quarter average retail gasoline price (all services, all grades) is now expected to be $1.25 per gallon, 4 cents per gallon below the second-quarter average and 6 cents per gallon below the 1996 third quarter average. Current price strength evident in the spot market is expected to be short-lived. It is related to unusual strength in the domestic transportation fuel market that should diminish in August. Other highlights from the EIA monthly Short-Term Energy Outlook include: Natural Gas Prices and Storage Natural gas storage levels are currently higher than last year's, injections into storage have generally been strong, and natural gas spot prices have remained fairly steady since the beginning of May. With slightly higher storage levels than last year's expected at the start of the heating season (November 1), the average wellhead price for next winter is still expected to be more than 30 cents per thousand cubic feet lower than last winter's price. As always, weather is a factor in the forecast. A prolonged hot spell could lower storage injections, and hurricanes in the gas-producing Gulf Coast could result in supply disruptions. Also, early cold weather in October and November could cause an unexpected surge in heating demand, pushing storage down and spot and futures prices up, as happened last year. Electricity Demand Slows While Nuclear Generation Declines This summer, there have been fewer cooling degree-days (CDDs) than normal across the U.S. This has helped to keep electricity demand below last year's levels in the second quarter, despite the expected boost to economic growth this year. Electricity demand in 1997 is expected to grow by only 0.5 percent, with most of the growth occurring in the third and fourth quarters, assuming normal weather. Nuclear electricity generation is expected to decline by 4.7 percent, or 31.5 billion kilowatt-hours, in 1997. This is due to the continued shutdown of 8 nuclear plants in the Northeast, 2 in the Southeast, and another 7 in the Midwest. Utility Coal Use Will Remain Strong in the Summer of 1997 The significant increase in coal-fired generation (1.8 percent) expected this summer is due mainly to expected declines in other generation sources, mainly nuclear and hydro. Summer hydroelectric generation is predicted to decline by 2.4 percent from the twenty-year high experienced in 1996. The Short-Term Energy Outlook is now being released on Internet on a monthly basis to meet the public's demand for more timely availability of energy data and forecasts. Internet access to the Short-Term Energy Outlook can be obtained through the EIA Home Page on the World Wide Web system. The direct Internet address for the Outlook is: http://www.eia.doe.gov/emeu/steo/pub/contents.html
EIA Press Contact: Thomas Welch, 202-586-1178 EIA-97-18 Contact:
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