In its Short-term Energy Outlook released on July 7, the Energy Information Administration adjusted slightly higher its price expectations for both retail gasoline and diesel fuel, with the increases based on a stronger sentiment for its crude oil price projection.
"EIA's view of the world oil market is largely unchanged from recent Outlooks. EIA forecasts that world oil prices will rise slowly as an expected renewal of global economic growth leads to higher world oil demand and members of the Organization of Petroleum Exporting Countries continue their support of prices near current levels," the agency said.
The agency projected an average regular grade gasoline price of $2.80 gal during this summer's driving season, an increase of 36cts from the year prior but just a penny above last month's estimate. The average is 12cts below EIA's April price forecast when oil prices were significantly higher.
The summer driving season is defined as the period between April 1 and Sept. 30.
The EIA's projected regular grade gasoline retail prices rise from a realized average of $2.35 gal in 2009 to an expected $2.77 gal average in 2010 and $2.90 gal in 2011.
For retail on-highway diesel fuel, the EIA anticipates a $2.98 gal price average this year, 2cts above estimates a month ago. The fuel averaged $2.46 gal in 2009.
The agency expects on-highway retail diesel prices will average $3.13 gal in 2011, also 2cts higher than prior month estimates.
For the chief feedstock, the agency expects West Texas Intermediate crude oil spot prices, which ended June near $76 bbl, will average $79 bbl over the second half of 2010 and $83 bbl in 2011.
WTI crude prices averaged $75.34 bbl in June, which is $1.60 above the prior month's average and close to the $76 bbl projected in last month's forecast.
"Energy price forecasts are highly uncertain, as history has shown. WTI futures for September 2010 delivery for the 5-day period ending July 1 averaged $77 per barrel, and implied volatility averaged 35 percent. This made the lower and upper limits of the 95-percent confidence interval $60 and $98 per barrel, respectively," said EIA.
Last year at this time, WTI for September 2009 delivery averaged $70 bbl and implied volatility averaged 44 percent, rendering the limits of the 95-percent confidence interval at $52 and $95 bbl, respectively.
EIA reported that U.S. liquid fuels consumption is beginning to show signs of recovery after having fallen by 810,000 bpd in 2009, which marked the fourth consecutive annual decline. The year-over-year decline in total liquid fuels consumption slowed to 20,000 bpd in the first quarter, while second quarter consumption rose 500,000 bpd versus the comparable 2009 period. Projected total liquid fuels consumption will increase by 200,000 bpd in 2010 and 170,000 bpd in 2011 as all of the major petroleum products register consumption growth.
According to the release, ethanol production, which averaged 700,000 bpd in 2009, is projected to increase to an average 850,000 bpd in 2010 and 880,000 bpd in 2011. The agency forecasts that liquid fuel net imports, including both crude oil and refined products, which declined by 1.4 million bpd in 2009, will decline by an additional 110,000 bpd in 2010. In 2011, project total liquid fuel net imports increase by 80,000 bpd.
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