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Gasoline prices will keep declining

Posted: Thursday, April 10, 2003

WASHINGTON -- Gasoline prices will continue to decline through the summer because of falling crude oil prices and optimistic expectations for the war in Iraq, the Energy Department said Tuesday.

The department's summer energy forecast said gasoline prices likely would average $1.56 a gallon during the vacation driving season, a substantially more optimistic forecast than was issued a month ago. Then, the department expected motorists to pay more than $1.70 a gallon throughout the summer.

The report by DOE's Energy Information Administration cautioned that prices are likely to range widely in different parts of the country. It said gasoline prices in California, for example, are expected to be about 50 cents a gallon higher than the national average.

EIA Administrator Guy Caruso said the summertime anticipated average of $1.56 a gallon is still 17 cents a gallon higher than last summer but close to the prices that motorists paid at the pump in the summers of 2000 and 2001.

Gasoline prices dropped nearly a dime in the last three weeks when the national average was $1.73, the highest motorists ever have paid for gasoline. The EIA reported a price of $1.63 a gallon on Monday.

The report said the gasoline price drop reflected the dramatic decline in crude oil prices in recent weeks. The price of crude, which hit a high of nearly $40 a barrel on Feb. 27, was around $28 a barrel on the New York Mercantile Exchange on Monday.

Despite the optimistic forecast, Caruso said there is an urgent need to increase gasoline inventories, which continue to be at levels below average.

''We've got an uphill battle to meet the inventory requirements,'' Caruso said. He said refiners are expected to increase gasoline production.

The EIA predicted that gasoline demand this summer will increase slightly over last year but will remain below the average of the last five years.

Caruso said gasoline stocks are a bit higher in California than in the rest of the country. Nevertheless, he said, California gas prices are expected to stay substantially higher than in other regions because of the states' transition away from using the MTBE gas additive and some refinery problems.

Caruso said it ''seems reasonable'' to expect that Iraq's oil exports will not resume in any substantial amount for a number of months. He noted that military officials had said it might take seven months to get Iraqi exports -- about 2 million barrels a day -- back to normal.

Caruso also said the EIA's forecast assumed no dramatic decline in world oil production.

He said OPEC should continue its current production levels of about 26.5 million barrels a day in order to increase U.S. inventories of both crude oil and gasoline.

OEPC ministers are expected to meet April 24 to discuss whether to cut back production because of fear that oil prices otherwise would continue to decline.



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