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 mostly unchanged from 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. After increasing to as high as $19 per barrel in August and September of this year, EIA expects that the WTI crude oil spot price discount to the Brent crude oil spot price will average $17 per barrel in the fourth quarter of 2012 before falling to $9 per barrel by the end of 2013.

Energy price forecasts are highly uncertain (Market Prices and Uncertainty Report). WTI futures for January 2013 delivery during the five-day period ending October 4, 2012, averaged $92.09 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 January 2013 at $70 per barrel and $121 per barrel, respectively. Last year at this time, WTI for January 2012 delivery averaged $79 per barrel and implied volatility averaged 50 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $51 per barrel and $123 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 2012. Prices then fell for three consecutive months, averaging $3.44 per gallon in July. Rising crude prices contributed to a second run-up in regular gasoline retail prices to an average of $3.85 per gallon in September 2012. EIA expects retail gasoline prices to begin declining in October as the gasoline market transitions from summer-grade to winter-grade gasoline specifications and forecast crude oil prices begin to fall. Projected regular gasoline retail prices average $3.60 per gallon during the fourth quarter of 2012, up slightly from $3.58 per gallon projected in last month's Outlook. Projected regular gasoline retail prices average $3.65 per gallon in 2012 and $3.44 per gallon in 2013.

Diesel fuel retail prices rose from a monthly average of $3.83 per gallon to January 2012 to a high of $4.13 in March, then fell to a low of $3.72 in July. Tight market conditions and increasing crude oil prices drove on-highway diesel fuel prices back near monthly highs for the year average $4.12 per gallon in September. EIA expects that on-highway diesel fuel retail prices will average $3.98 per gallon during the fourth quarter of this year and $3.81 per gallon in 2013. Wholesale diesel margins (the difference between the wholesale price of diesel and the refiner acquisition cost of crude oil) averaged 60 cents per gallon the first half of 2012 before climbing to an estimated 85 cents per gallon in September, the highest level since May 2008. In 2012, EIA projects those margins will average 68 cents per gallon in 2012 and 63 cents per gallon in 2013, compared with the previous 5-year average of 52 cents per gallon.

U.S. Natural Gas Prices

Natural gas spot prices averaged $2.85 per MMBtu at the Henry Hub in September 2012, up $0.01 per MMBtu from the August average and $1.05 per MMBtu (27 percent) lower than the September 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 Henry Hub spot price increases this summer, from the monthly average low of $1.95 per MMBtu in April 2012. EIA expects the Henry Hub natural gas price will average $2.71 per MMBtu in 2012 and $3.35 per MMBtu in 2013.

Natural gas futures prices for January 2013 delivery (for the five-day period ending October 4, 2012) averaged $3.84 per MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95-percent confidence interval for January 2013 contracts at $2.77 per MMBtu and $5.31 per MMBtu, respectively. At this time last year, the January 2012 natural gas futures contract averaged $4.10 per MMBtu and the corresponding lower and upper limits of the 95-percent confidence interval were $3.10 per MMBtu and $5.40 per MMBtu.

U.S. Coal Prices

Delivered coal prices to the electric power industry increased steadily over the 10-year period ending in 2011, when the delivered coal price averaged $2.40 per MMBtu (a 6-percent increase from 2010). However, EIA expects the decline in demand for coal, combined with 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 will average $2.40 per MMBtu in 2012 and $2.42 per MMBtu in 2013.

U.S. Electricity Retail Prices

EIA expects the nominal U.S. residential electricity price will rise by 0.4 percent during 2012 to an average of 11.84 cents per kilowatthour. During 2013, U.S. residential retail electricity prices increase 1.3 percent over the average 2012 price. When measured in real terms, the U.S. residential electricity price declines by 1.7 percent in 2012 and by 0.3 percent in 2013.