The U.S. Energy Information Administration again cut its price forecasts for 2009 oil and fuel prices.
The agency, in its monthly Short-Term Energy Outlook released this week, says economic contraction and lower projected crude oil prices will mean retail diesel fuel will average $2.27 per gallon in 2009 and retail gasoline prices will average $1.87. This is down from last month's forecast for average retail gasoline and diesel fuel prices in 2009 of $2.03 and $2.47 per gallon, respectively.
World oil consumption continues to be revised downward in response to the global economic downturn. Global consumption is estimated to have been largely unchanged in 2008 and is projected to fall by 800,000 barrels per day in 2009, says the EIA in its monthly Short-Term Energy Outlook. Total world oil consumption is expected to record a modest rebound in 2010, rising by 880,000 barrels per day from year-earlier levels, on the assumption of the beginning of an expected recovery in global economic growth.
Having fallen from record highs to below $40 per barrel, prices for West Texas Intermediate crude averaged near $100 per barrel in 2008, EIA notes. Under current economic assumptions and assuming no major crude oil supply disruptions, WTI prices are expected to average $43.25 per barrel in 2009 and $54.50 per barrel in 2010.
EIA notes that OPEC's December announcement that it would cut crude oil production again, following its earlier cut in November, has not yet led to a substantial increase in oil prices. Together, the two announced cuts imply a new overall target for production (excluding Iraq) of nearly 25 million barrels per day , 4.2 million below actual September production. However, the market is not presently convinced that OPEC members will willingly curtail output enough to lead to much higher prices.
Because of lower motor gasoline consumption, the difference between the retail gasoline price and the cost of crude oil is expected to remain narrow for much of 2009 but is expected to increase slightly in 2010.
On-highway diesel fuel retail prices, which averaged $3.79 per gallon in 2008, are projected to average $2.27 per gallon in 2009 and $2.54 in 2010. The projected continuation of the decline in the consumption of diesel fuel in the United States as well as a slowing of the growth in distillate fuel usage outside the United States are expected to result in a weakening of refining margins for distillate throughout the forecast.