World crude oil prices initially fell following the June 23 announcement by the International Energy Agency that its member countries would release up to 60 million barrels from strategic reserves, but then rose above the pre-announcement levels in late June and early July.
Attributing observed price changes since June 23 to the IEA announcement is difficult for a number of factors. Other drivers include including changing expectations of world economic and crude oil consumption growth, uncertainty over oil supply disruptions, estimates of OPEC spare production capacity, and other physical and financial factors.
Although the release from the reserves will provide some additional supply, the U.S. Energy Information Agency expects oil markets to tighten through 2012.
In its monthly Short-Term Energy Outlook, the EIA noted that given projected world oil demand growth and slowing growth in supply from countries that are not members of OPEC, the projected U.S. average refiner acquisition cost of crude oil rises from $102 per barrel in 2011 to $108 per barrel in 2012, about $1 per barrel below last month's Outlook.
EIA expects that on-highway diesel fuel retail prices, which averaged $2.99 per gallon in 2010, will average $3.86 per gallon in 2011 and $3.95 per gallon in 2012, relatively unchanged from the previous Outlook. Projected U.S. refining margins on diesel fuel increase from an average $0.38 per gallon in 2010 to $0.62 per gallon in 2011, then fall to $0.55 per gallon in 2012.
EIA forecasts that the annual average regular-grade gasoline retail price will increase from $2.78 per gallon in 2010 to $3.56 per gallon in 2011 and to $3.65 per gallon in 2012, both slight reductions from last month's Outlook. The sizable jump in retail prices this year reflects not only the higher average cost of crude oil compared to previous years, but also an increase in U.S. refining margins on gasoline (the difference between refinery wholesale gasoline prices and the average cost of crude oil) from an average of $0.34 per gallon in 2010 to $0.45 per gallon in 2011 and $0.42 per gallon in 2012.