Gasoline price forecast: $2 a gallon, with spikes possible, U.S. says

The U.S. Department of Energy is forecasting a gentle ride for gasoline prices this year, with price peaks this spring probably not too far above $2 per gallon. Probably.

“Regular-grade gasoline prices, which averaged $3.26 per gallon in 2008, are projected to average $1.96 per gallon in 2009 and $2.18 per gallon in 2010, the DOE’s Energy Information Administration said Tuesday in its March “Short Term Energy Outlook.”

But even the Feds can’t guarantee there won’t be a few bad days at the pumps.

“It remains possible that weekly prices could rise significantly higher at some point this spring or summer,” the report warns.

The average pump price in the Cleveland-Akron metropolitan area Tuesday was $1.94 to $1.95, about the same as the national average price, according to the AAA.

Overall, the federal report is a somber assessment of decreased consumption here and around the world because of the global recession. It predicts moderate pricing for all fuels until the recession ends.

There are a couple of consumer bright spots in addition to reasonable gasoline prices. The agency thinks natural gas prices should stay low for all of 2009 and moderately increase in 2010. But there is cloud is this silver lining.

Here are the details:

Wholesale natural gas prices will average just $4.67 per 1,000 cubic feet for all of 2009 as industrial demand plummets by 6 percent, the agency predicts. Prices will pick up to $5.87 next year if the economy improves. The price on the New York Mercantile Exchange Tuesday was $3.835. its lowest price in six years.

Higher prices could happen in 2010 if the economy recovers faster than expected and industrial demand for the fuel surges, outpacing the industry’s ability to ramp up new production and eating into supplies of stored gas.

Natural gas inventories are currently above average, partly because of an 8 percent increase in production last year and because of the sharp decline in industrial demand.

But only about half as many new wells are being drilled today compared to last August, the report notes. Meanwhile the amount of gas flowing from older wells is naturally declining. Because of those factors, the agency predicts that gas production will be flat in 2009.

Among the report’s other conclusions:

The price of diesel fuel, which can affect the price of all consumer goods, could fall below the price of gasoline this summer. Global demand for diesel fuel has fallen. (U.S. refineries have been exporting diesel, increasing profits and helping to keep prices higher here as well.)

Diesel prices are expected to nationally average $2.19 per gallon for 2009, the report predicts, and in 2010 increase to an annual average of $2.51.

Oil prices will average $42 per barrel for 2009 and move up to an annual average of $53 in 2010 as economies around the world begin to recover and demand increases. Oil closed Tuesday on the NYMEX at $45.

Electricity consumption is expected to decline overall by 1.7 percent, with industrial demand falling by 6.4 percent. Because coal and natural gas prices are down, some utilities are reducing rates. Still, others are asking for slight increases. In Ohio, all of the investor-owned utilities have sought rate increases.
By John Funk
March 10, 2009, 3:18PM

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