The most recent short-term energy forecast released by the Energy Information Administration (EIA) this week projects that gasoline prices will continue falling well into next year while diesel will remain at current levels. Relative stability in oil prices is one reason EIA expects fuel prices to fall or stay flat next year.
The agency believes the U.S. average refiner acquisition cost (RAC) of crude oil will only increase slightly over the next year-- averaging about $101 per barrel by the end of 2011 and increasing to only $102 in 2012.
“Tension in the oil‐producing regions of the Middle East and Africa continues to exert upward pressure on oil prices,” the agency noted in its report. “However, this pressure has been offset by the restoration of Libyan oil output, which has thus far exceeded our prior expectations. At the same time, downside demand risks persist, stemming from fears about weakening global economic growth and the contagion effects of the European Union’s debt crisis.”
Reduced demand is also contributing to the decline expected in gasoline prices, according to data tracked by EIA. Demand should fall so much that the U.S. should finish 2011 as a net exporter of petroleum products for the first time since 1949. Gross product exports are expected to average 300,000 barrels per day (bbl/d) more than gross product imports for the year.
And the agency expects that the U.S. will remain a net petroleum-product exporter of some 200,000 bbl/d in 2012.
Given that, EIA forecasts that the retail price for average, regular‐grade gasoline will slip to $3.45 per gallon in 2012, down from the $3.53 per gallon average expected for 2011. However, the average for 2012 is still seen as coming in well above the $2.78 per gallon price average of 2010.
“The higher retail price in 2011 reflects not only the higher cost of crude oil but also changes in the average U.S. refinery gasoline margin – the difference between refinery wholesale gasoline prices and the average cost of crude oil,” EIA explained in its report.
That margin difference jumped to 47 cents per gallon in 2011. That’s up from 34 cents per gallon last year, but it is expected to fall to 35 cents per gallon in 2012.
As of the week of Dec. 5, the U.S. average price for gasoline is $3.29 per gallon, according to the agency. That marks a decline of 2 cents per gallon from the prior week and 8 cents lower per gallon compared to two weeks ago. Yet gasoline is still costlier relative to 2010, with the price higher by 33 cents per gallon now compared to the same week in 2010.
The retail price for on‐highway diesel, however, is expected to remain at current levels, averaging $3.85 per gallon for both 2011 and 2012. That is much higher than the $2.99 per gallon average price seen in 2010.
EIA said the U.S. average price for diesel declined 3 cents this week to $3.93 per gallon and is down a little over 8 cents per gallon from its $4.01 U.S. average two weeks ago. Yet diesel is still 73 cents more expensive per gallon compared to the same week in 2010, the agency pointed out.
Diesel also remains over $4 per gallon in five U.S. regions: New England ($4.03), the Central Atlantic ($4.01), the Rocky Mountains ($4.03), the West Coast ($4.10) and California ($4.17).
The dichotomy between diesel and gasoline prices is expected to continue widening into next year as well, EIA noted.
“Between 1990 and 2004 annual average wholesale gasoline prices ranged from 5 cents per gallon to 11 cents per gallon above wholesale diesel prices,” the agency said. “But beginning in 2005, wholesale gasoline prices fell below wholesale diesel fuel prices in all years except 2009 as world demand growth for diesel fuel, primarily in the emerging economies, outpaced gasoline demand growth.”
In 2010, gasoline prices fell below wholesale diesel prices again as world demand growth for diesel fuel picked up, EIA pointed out. “We expect the gasoline wholesale price to weaken further relative to diesel prices, averaging 17 cents per gallon below diesel in 2011 and 22 cents per gallon below diesel in 2012,” the agency said.