HOUSTON — The Energy Department predicted on Tuesday that motorists would pay the lowest prices at the pump this summer since 2009, even though falling global oil prices have gained back some ground in recent days.þþIn its short-term energy forecast, the department calculated that the average national price for regular gasoline in the April-through-September summer driving season would be $2.45 a gallon, compared with $3.59 a gallon over the same period last year.þþThe average American household is expected to spend about $700 less on gasoline in 2015 compared with 2014, according to the report, and annual vehicle fuel expenditures are on track to fall to their lowest in 11 years.þþThe lower gasoline prices should encourage families to take to the road for their vacations, helping hotels, restaurants and amusement parks as well as refiners and gasoline stations. Lower-income consumers, who pay a relatively higher percentage of their incomes on energy than more affluent people, will benefit the most from the lower prices.þþ“Gasoline consumption this summer is expected to be up 2 percent from last year to the highest level in five years,” said Adam Sieminski, head of the department’s Energy Information Administration, “as higher employment and lower pump prices encourage more driving.”þþThe rising consumption represents a break with recent years, when more fuel-efficient vehicles and a weak job market reduced fuel consumption.þþOil and gasoline prices peaked last June and July during the surprise offensive by Islamic State militants that threatened Iraq’s oil fields, but oil prices have declined by roughly 50 percent since then. Gasoline prices fell somewhat less because taxes per gallon remained steady. Slumping prices fell with increasing rapidity after the Organization of the Petroleum Exporting Countries declined to cut production last November in the hope of forcing American oil producers to ease their drilling frenzy of recent years.þþSince early January, oil and gasoline prices have been bouncing around a relatively narrow band, and there are tentative signs that petroleum prices may have bottomed. On Tuesday, the American benchmark gained more than 3 percent, to nearly $54 a barrel; it was the second day of robust gains.þþSaudi Arabia, the biggest global exporter, has raised prices two months in a row in Asia as demand there has recovered. American producers have decommissioned half their rigs since last year, and the rise in domestic production is beginning to slow. Until recently, many analysts predicted that American oil storage capacity would soon reach its limit, forcing fuel prices even lower, but increasing gasoline and diesel demand now appears to be easing the glut.þþGasoline prices have been fairly stable over the last month after falling fast since last fall. The average national price for a gallon of regular gasoline on Tuesday was $2.38, according to the AAA motor club, 3 cents below a week ago and 7 cents below a month ago. The average price a year ago was $3.57 a gallon.þþMost global oil benchmark prices had fallen to nearly $40 a barrel in early January, but they are now comfortably above $50 a barrel. Brent crude, the leading world benchmark, is now approaching $60, although few analysts say it will climb back above $100 a barrel anytime soon.þþThe Energy Department report predicted that the Brent benchmark would average $59 in 2015 and $75 in 2016. The American benchmark, West Texas Intermediate, is expected to be $7 lower than Brent this year and $5 lower next year. At those prices, most drilling in the United States will be profitable next year, though the profits of most oil companies will remain muted compared to those of recent years.þþThe report suggested that a successful conclusion to the nuclear talks with Iran could bring oil prices down even further, by $5 to $15 a barrel in 2016.þþ“A lifting of sanctions against Iran,” Mr. Sieminski said, “could significantly change the forecast for oil supply, demand and prices by allowing a significantly increased volume of Iranian barrels to enter the market.”þþThe report noted that Iran could have at least 30 million barrels in storage, and it probably has the technical ability to raise production by at least 700,000 barrels a day by the end of 2016. But it added that the pace of Iran’s return to the global marketplace would have to be determined by negotiations and Iran’s compliance with the terms of an eventual agreement.þþ
Source: NY Times
