Prices

Global Crude Oil Prices

EIA projects the price of Brent crude oil will average $112 per barrel in 2012 and $103 per barrel in 2013, both about 3 percent higher than last month's Outlook. EIA expects the WTI price to average $93 per barrel in the second half of 2012 and largely remain at this level throughout the forecast period. EIA expects that the WTI crude oil spot price discount to the Brent crude oil spot price will continue, averaging $17 per barrel in the fourth quarter of 2012 and then falling to $9 per barrel by the end of 2013.

Energy price forecasts are highly uncertain (Market Prices and Uncertainty Report). WTI futures for December 2012 delivery during the five-day period ending September 6, 2012 averaged $96.11 per barrel. Implied volatility averaged 31 percent, establishing the lower and upper limits of the 95-percent confidence interval for the market's expectations of monthly average WTI prices in December 2012 at $74 per barrel and $126 per barrel, respectively. Last year at this time, WTI for December 2011 delivery averaged $89 per barrel and implied volatility averaged 40 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $62 per barrel and $127 per barrel.

U.S. Petroleum Product Prices

After a sharp increase in retail gasoline prices earlier this year, the monthly average price for regular grade gasoline reached $3.90 per gallon in April. Prices then fell for three consecutive months, averaging $3.44 per gallon in July. Rising crude prices contributed to an increase in regular gasoline retail prices to $3.84 per gallon on September 3. EIA expects retail gasoline prices to begin declining later this month as the gasoline market recovers and transitions from summer-grade to winter-grade gasoline specifications. Projected regular gasoline retail prices average $3.58 per gallon during the fourth quarter of 2012, up from the $3.30 per gallon projected in last month's Outlook. Projected regular gasoline retail prices average $3.64 per gallon in 2012 and $3.43 per gallon in 2013, both about 11 cents per gallon higher than in last month's Outlook. EIA expects that on-highway diesel fuel retail prices, which averaged $3.84 per gallon in 2011, will average $3.96 per gallon and $3.73 per gallon in 2012 and 2013, respectively.

U.S. Natural Gas Prices

Natural gas spot prices averaged $2.84 per MMBtu at the Henry Hub in August 2012, down $0.11 per MMBtu from the July average and $1.21 per MMBtu (30 percent) lower than the August 2011 average. While abundant supplies have kept prices relatively low, a hot summer and associated increases in demand for natural gas for power generation contributed to the increase in prices in July. EIA expects the Henry Hub natural gas price will average $2.65 per MMBtu in 2012, with prices remaining below $3.00 per MMBtu until December. EIA expects 2013 prices will average $3.34 per MMBtu.

Natural gas futures prices for December 2012 delivery (for the five-day period ending September 6, 2012) averaged $3.20 per MMBtu, and the average implied volatility based on options and futures prices was 40 percent (Market Prices and Uncertainty Report). Current options and futures prices imply that market participants place the lower and upper bounds for the 95-percent confidence interval for December 2012 contracts at $2.20 per MMBtu and $4.65 per MMBtu, respectively. At this time last year, the December 2011 natural gas futures contract averaged $4.29 per MMBtu and implied volatility averaged 32 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $3.18 per MMBtu and $6.21 per MMBtu.

U.S. Coal Prices

Delivered coal prices to the electric power industry have increased steadily over the last 10 years and this trend continued in 2011, with an average delivered coal price of $2.40 per MMBtu (a 6-percent increase from 2010). However, EIA expects the decline in demand for coal, combined with the large coal inventories, will begin to put downward pressure on coal prices and contribute to the shut-in of higher-cost production. EIA forecasts that the delivered coal price in 2012 will average $2.39 per MMBtu, and remain at that level in 2013.

U.S. Electricity Retail Prices

EIA expects the nominal U.S. residential electricity price will rise by 1.0 percent during 2012 to an average of 11.91 cents per kilowatthour. During 2013, U.S. residential retail electricity prices increase 0.9 percent over the average 2012 price. When measured in real terms, the U.S. residential electricity price declines by an annual average of 0.8 percent in both 2012 and 2013.