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EIA: Crude Oil Prices to Average $101 per Barrel in 2008

The combination of rising oil consumption and low surplus oil production capacity will continue to put upward pressure on oil prices this year, resulting in an annual average price of $101 per barrel, according to DOE's Energy Information Administration (EIA). The EIA's "Short-Term Energy Outlook," released on April 8, projects rising gasoline prices in the United States, with the monthly average price of regular unleaded gasoline peaking at about $3.60 per gallon this spring, suggesting the possibility that some local prices could exceed $4 per gallon. In addition, monthly average prices for diesel fuel will average about $3.90 per gallon in March and April, and weekly regional prices have already exceeded $4 per gallon in some parts of the country. According to the American Automobile Association's "Fuel Gauge Report," regular unleaded gasoline set a new record of $3.339 per gallon on April 7, while diesel fuel peaked at $4.037 in late March. See the Fuel Gauge Report Web site.

The EIA also concludes that the United States is not to blame for the current high energy costs. U.S. energy demand has been dropping, and the new report estimates that the U.S. consumption of liquid fuels will drop by about 85,000 barrels per day in 2008 as a result of the economic slowdown and higher petroleum prices. After accounting for increased ethanol use, U.S. petroleum consumption is expected to fall by 210,000 barrels per day in 2008, although it should start rising again next year. However, global petroleum demand is still increasing and is expected to grow by 1.2 million barrels per day in 2008. By the second part of the year, oil production increases in Azerbaijan, Brazil, and Sudan are expected to ease the strain on global oil supplies. The high oil prices are also affecting natural gas prices, which are expected to increase 20% this year.

Also according to the EIA we can thank Europe for U.S. gasoline prices that are lower than diesel prices, which is a flip-flop of historic U.S. trends in fuel prices. Because of the higher demand for diesel fuel in Europe, much of their gasoline is exported to the United States. On the East Coast, about 30% of the gasoline comes from imports, and that's actually helping to keep gasoline prices lower than they would be otherwise. See the EIA's "Short-Term Energy Outlook," and for the latest prices for light, sweet crude oil, see the New York Mercantile Exchange Web site.