By Selam Gebrekidan and Matthew Robinson
NEW YORK May 8 U.S. consumers bracing for a
costly summer have reason to breathe easier.
Regular gasoline prices will average $3.79 a gallon between
April and September this year when more motorists are likely to
hit the road, the data arm of the U.S. Department of Energy said
on Tuesday. That is the exact same price as the national average
last week, according to data released on Monday.
The downgrade comes after a 13 percent drop in crude oil
prices from their peak in March, and would put pump prices on
course to be just 8 cents higher than a year ago, the
department's statistics arm said in its monthly outlook. Last
month the agency forecast a price of $3.95 a gallon.
Lower gasoline prices will temper concerns the economy is
heading for a repeat of last year when a spike in gasoline left
people with less money for other expenses and stole momentum
from the economic recovery.
"Billions of dollars won't be spent by consumers on gasoline
that can be spent on other things," said Chris Varvares, an
economist at Macroeconomic Advisers in St. Louis.
Lower gasoline prices will also take the edge off of
inflation, which could give the U.S. Federal Reserve more room
to ease monetary policy should the recovery falter.
But the forecasts also reflect a slightly gloomier reality.
Prices have been falling because of lackluster economic
indicators in both the United States and Europe. Gasoline
futures prices slid below $3 a gallon for the first time
since February and consumption is down more than 6 percent from
a year ago amid still high unemployment.
"The (EIA) forecast is more a reflection of what gasoline
prices have already done over the past month," said Tim Evans,
Energy Analyst with Citi Futures Perspective.
Crude prices, which account for about two-thirds of the cost
of gasoline, surged in the first quarter due to a string of
production outages across the globe and the threat of a
large-scale disruption of Iran's supplies due to Western
sanctions against Tehran.
International benchmark Brent crude topped $128 a barrel for
the first time since 2008 in early March, driving U.S. gasoline
to near $4, the highest level ever for that time of year.
Further support for gasoline prices came from expectations
that three refineries on the East Coast would be shut down due
to weak profits, causing regional supply shortfalls.
But the market's focus has now shifted. U.S. crude has
tumbled below $100 a barrel to touch its lowest level since
December because of persistent economic uncertainties in Europe
and the United States and the largest crude stocks buildup since
Concerns about supplies on the Eastern seaboard eased and
prices followed lower after two of the three East Coast
refineries threatened with shutdown found potential buyers.
The downward revision in gasoline prices came despite
forecasts for a slightly tighter oil market this year. In the
May Short-Term Energy Outlook, the administration projected oil
production from non-OPEC nations will average 52.6 million
barrels per day in 2012, a 100,000 bpd cut from previous growth
Moreover, EIA raised demand forecasts worldwide by 70,000
bpd to 960,000 bpd in its latest reports.
Gasoline demand picks up over the summer as motorists take
to the road for holidays, with the late May Memorial Day holiday
weekend kicking off the season.