Government predicts lower gas prices this summer
WASHINGTON – Gasoline prices should peak this month and decline to an average of $1.46 a gallon for the summer, the government said Thursday, revising dramatically its previous expectations of soaring fuel prices going into the vacation season.
While the forecast dampened the prospect of $2 per gallon of regular grade gasoline even in high-price areas, as once feared, motorists still will be paying about 25 percent more for gasoline this summer than last year, the forecast said.
It said the average family, traveling 12,000 miles from April through September, is likely to pay $170 more for fuel this year than last vacation season.
The Energy Department said Thursday its revised forecast, taking into account the additional oil production announced by world producers last month, shows the average price nationwide peaking at $1.52 a gallon this month and then declining.
Gasoline prices already have dropped a bit in some places. The forecast estimates prices averaging $1.39 a gallon after Labor Day. Still, officials warned that the estimates are national averages and in some areas prices are likely to be higher.
Average gasoline prices in California in March, for example, have been 26 cents a gallon higher than the national average, with the disparity expected to continue into the summer, the report said.
The latest analysis by the Energy Information Administration was in sharp contrast to its forecast a month ago when the agency said that even with increased oil production, gasoline prices were expected to soar to a national average of $1.80 a gallon. That prompted widespread fear of $2 per gallon gas just when millions of Americans hit the road for summer vacations.
”Today’s estimates … are proof that the Clinton administration’s quiet diplomacy worked,” said Energy Secretary Bill Richardson. ”This positive news reinforces OPEC’s efforts to bring stability and loss volatility to the markets.”
The turn of events was welcomed by motorists.
”Isn’t that thrilling,” said Sandy Cohen, 51, of Virginia, when told of the latest price predictions as he browsed through maps at the American Automobile Association office near the White House. Cohen said he planned a 500-mile summer trip in the family minivan that ”gets horrible mileage” and every penny saved at the pumps helps.
But Joe McNearney, 21, a congressional intern from Minnesota, said he viewed the forecast with skepticism. ”I’m going to wait and see if the prices really go down,” he said.
On Capitol Hill, meanwhile, the enthusiasm for giving motorists relief from high gasoline prices seemed to lose momentum. The Senate approved by a 66-34 vote a nonbinding resolution opposing a federal gas tax rollback of 4.3 cents per gallon. Rollback critics said it would give little help to consumers while depriving the government of billions of dollars needed for road projects.
The EIA forecast assumed that additional oil would begin hitting the U.S. market by May and June as a result of a decision March 28 by the Organization of Petroleum Exporting Countries to boost production by 1.7 million barrels a day. Other non-OPEC producers also would pump more oil.
Venezuela’s oil minister, Ali Rodriquez, indicated this week that another production increase may be planned when the OPEC oil minister meet again in late June.
The EIA report predicted that crude oil prices will continue to drop for the remainder of the year and into 2001. The spot price for light sweet crude was $25.68 per barrel on Thursday on the New York Mercantile Exchange. Earlier this year, oil reached a high of $34 per barrel.
Government and private economists said the revised gasoline outlook stems from crude oil and gasoline stocks not declining as rapidly as had been anticipated and additional oil moving into the U.S. market quicker than expected.
”We are more optimistic today. Some of the tightening of the market has improved,” EIA Administrator Jay Hakes said at a news conference.
Government and industry officials previously have said it likely would take four to six weeks for any of the oil pumped as a result of the production increases to get into the U.S. market.
Refiners have begun ramping up their output of gasoline, Hakes said.
But stocks remain ”sharply below last year’s level at this time,” according to the report. The EIA said gasoline stocks as of April 1 were 198 million barrels, compared with 216 million barrels at the same time a year ago.
The American Petroleum Institute, meanwhile, said this week that in the last week of March, stocks averaged 202 million barrels. The normal range this time of year is 200 million to 220 million barrels. American motorists were expected to use an average of 8.72 million barrels of gasoline a day this summer, or 1.5 percent more than a year ago. There are 42 gallons in a barrel.
EDITOR’S NOTE – Associated Press Writer Rebecca Sinderbrand contributed to this story.
On the Net: Energy Information Administration: http://www.eia.doe.gov
American Petroleum Institute: http://www.api.org