Energy prices are on the minds of many Americans today. As we've reported, gasoline prices have increased recently, and now an Arctic air mass is bringing unusually cold temperature to the East Coast, from Maine to Florida, increasing the demand for heating fuels. If you're wondering how the weather and other factors might influence the price of fuels in the next few weeks, here's some information that might be helpful.
First, gasoline prices have risen by about a dime in the past nine days. AAA says the nationwide average price of gasoline yesterday was $2.958 per gallon.
Also, the U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook released today projects that regular-grade gasoline is likely to average $2.88 per gallon this winter, which is 22 cents a gallon higher than last winter. EIA also says that gasoline prices could push the annual average price of gasoline to $3.00 a gallon in 2011. Diesel fuel could rise to an average of $3.23 a gallon, according to EIA.
Why is EIA projecting an increase? The U.S. government agency points to several factors that it believes could influence the price of crude oil on the global marketplace. As we've explained in this space, gasoline is refined from crude oil, making the cost of crude oil the single largest component in the retail price of gasoline.
EIA's report says:
- The global oil market is tightening gradually. The worldwide consumption of liquid fuels grew by 2 million barrels per day this year, outstripping the supply growth from countries outside the Organization of Petroleum Exporting Countries (OPEC). Further, EIA says the projected reduction in oil inventories in the Organization for Economic Cooperation and Development (OECD) countries is expected to "lend support to firming oil prices."
- Although the non-OPEC countries in 2010 have experienced the highest year-over-year crude oil production increase since 2002, non-OPEC oil production is expected to fall by 280,000 barrels a day in 2011.
- OPEC crude oil production is expected to increase slightly both in 2010 and 2011 "to accommodate increasing world oil consumption."
- West Texas Intermediate (WTI) crude oil (a benchmark oil used to track crude oil prices) is expected to average about $84 a barrel this winter, which is more than $6 higher than the average price last winter. EIA also projects that WTI will rise to $89 by the end of 2011 as global economic conditions improve and demand grows for oil products.
EIA also says the average household expenditure for space-heating this winter will be $962, which is about the same as last year. Those who heat with heating oil are projected to pay 14 percent more this winter, while those who heat with natural gas and electricity are expected to pay less.