Barring any Hurricane Katrina or Rita-like supply disruptions, the Energy Information Administration (EIA) has forecasted that this summer (April 1 to Sept. 30) gasoline and diesel prices will average $2.76 and $2.79, respectively.
Demand for distillate, a petroleum product from which diesel and heating oil is derived, is projected to increase 2.4% in 2006 and 3.1% in 2007 because of economic expansion.
EIA emphasized the unpredictable effects this year’s hurricane season, might have on fuel. Hurricane activity was forecasted to be “very active” but considerably less so than 2005, in recent updates of its short-term energy outlook and petroleum reports.
“U.S. consumers needn’t assume the worst, but should be just aware that, even on a beautiful day, storm clouds may be just over the horizon,” EIA stated.
EIA also warned of possible supply disruptions as a result of refiners switching from low sulfur diesel to ultra low sulfur diesel (ULSD). This would satisfy an Environmental Protection Agency mandate that 80% of refineries’ production and import of on-highway diesel is ULSD. The transition won’t be mandated for the retail level until Oct. 15.
“The major difficulty to overcome is delivering ULSD, rather than producing it. The nation’s complex pipeline and tank network also handles high-sulfur products, which can leave behind enough sulfur to ruin the ULSD even if the product leaving the refinery is cleaner than the required standard at retail,” said EIA.
