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U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
APRIL 8, 2004

Tight Markets to Keep Summer Gasoline Prices High

This summer, gasoline prices are expected to average a record high of $1.76 per gallon, according to forecasts released today by the Energy Information Administration in its April Short-Term Energy Outlook.  High crude oil costs, strong gasoline demand, low gasoline inventories, and more stringent gasoline specifications this year have increased gasoline supply costs and retail prices to high levels well before the peak driving season.  It is also important to note that the domestic gasoline supply system is vulnerable to severe price shocks if major refinery or pipeline outages occur. 

Two factors that could reduce the risk of  higher pump prices would be a more rapid decline for crude oil prices than currently expected and solid improvement in the availability of gasoline import volumes from those seen so far this year.

  • West Texas Intermediate (WTI) prices averaged about $36.70 per barrel in March, a $5.60 per barrel climb from last November.  Price expectations through 2004 average $33 per barrel for crude oil.  Potential price spikes remain a danger given the uncertainty about Organization of Petroleum Exporting Countries (OPEC) production levels.  Modest oil price declines are expected in 2005 as Iraqi oil production continues to increase and inventories are rebuilt toward more normal levels.
  • Summer (April-September) motor gasoline demand is projected to average 9.32 million barrels per day, a new  high.  Demand continues to rise annually as the numbers of drivers and vehicles increase along with the general population and the number of households.  Average fleet-wide fuel efficiency is virtually unchanged from last year.
  • Beginning-of-season (March 31) total motor gasoline stocks are estimated at 200 million barrels, about the same as last summer.   Inventories are expected to end the season (September 30) at 201 million barrels.  Relatively tight inventory levels are expected to keep pressure on refinery output and import sources during peak demand periods.

Other highlights for the Short-Term Energy Outlook include:

  • EIA’s projection reflects the expectation that OPEC members other than Iraq will reduce production by about 1.5 million barrels per day from the average March level by May, a significantly smaller cut than implied by a literal reading of OPEC’s March 31 announcement.  Annual OPEC production (including Iraq) is expected to remain fairly constant (at roughly  27 million barrels per day) between 2003-2005, allowing for some modest stock building over the period.  Non-OPEC oil supply is projected to increase by about 1.4 million barrels per day in 2004 and by about 1.2 million barrels per day in 2005.  Most of the increases are projected to come from Russia and the Caspian Sea Region, with smaller increases expected from Africa, Canada, and Mexico. 
  • World oil demand is projected to continue growing annually by about 2.2 percent in 2004 and 2005 after posting a 2.0 percent gain in 2003.  In 2004, U.S. total oil demand is expected to climb to 20.3 million barrels per day, up 1.4 percent, as increases in transportation- and industrial-related use offset some reductions in heavy fuel oil demand.  An additional 2.5-percent growth in domestic demand is anticipated for 2005, bringing the annual average consumption rate to 20.9 million barrels per day.
  • Natural gas inventories at the end of March were about 10 percent below the 5-year average level, but are much higher than last year at this time.  Natural gas spot prices are likely to remain close to  $5.40 per thousand cubic feet this year. The projection for 2005 is about the same.  As in other recent projections, this outcome depends on modest growth in domestic production (about 1 percent per year) in 2004 and 2005.
  • Electricity demand in 2004 is expected to increase by 1.9 percent, driven by accelerated growth in the economy and weather-related increases in the first and the fourth quarters. In 2005, annual electricity demand is projected to grow by an additional 2.0 percent, as the economic expansion continues. 
  • Coal demand in the electric power sector is expected to continue growing in 2004 and 2005.  U.S. coal production is expected to increase by 2.8 and 2.9 percent in 2004 and 2005, respectively, as demand for coal increases.  Coal prices to the electric power sector are projected to increase by 3.4 percent (4 percent in the second quarter) this year. This is somewhat unusual given the generally stable nature of coal prices, and likely reflects the impact of  high natural gas prices in the electric power sector on the prices of competing fossil fuels.

The Short-Term Energy Outlook, published monthly on EIA’s Internet Web site to meet the public’s demand for timely energy data and forecasts, can be found at: http://www.eia.doe.gov/emeu/steo/pub/contents.html.

The report described in this press release was prepared by the Energy Information Administration, the independent statistical and analytical agency within the U.S. Department of Energy. The information contained in the report and the press release should be attributed to the Energy Information Administration and should not be construed as advocating or reflecting any policy position of the Department of Energy or any other organization.

EIA Program Contact:  David Costello, 202/586-1468

EIA Press Contact:  National Energy Information Center, 202/586-8800

EIA-2004-03

Contact:

National Energy Information Center
Infoctr@eia.doe.gov
Phone:(202) 586-8800
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