$1.46 gasoline forecast for summer

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$1.46 gasoline forecast for summer April 6, 2000 Web posted at: 11:41 AM EDT (1541 GMT)

WASHINGTON (AP) -- With the international cartel boosting oil production, the Energy Department on Thursday dramatically revised its forecast for summer gasoline prices, saying prices should peak later this month and decline to an average of $1.46 a gallon for the summer.

That's still 25 percent higher than last summer, but sharply lower than what had been predicted a month ago. The average motorist is expected to pay about $170 more for gasoline this summer than last, according to the Energy Information Administration.

GLOBAL GAS PRICES Click here to learn what consumers are paying for gasoline around the world. RESOURCES CNN In-Depth Specials - Priming the pump MESSAGE BOARD Rising oil prices Despite the traditionally heavy summer driving season, gasoline prices should decline steadily between May and September, falling to a national average of $1.39 cents after Labor Day, the agency said in a revised short-term forecast.

The report was in sharp contrast to a forecast a month ago when the agency said that even with increased oil production, gasoline prices were expected to soar to a national average of as much as $1.80 a gallon and likely reach $2 a gallon in some places by July.

"We are more optimistic today. Some of the tightening of the market has improved," said EIA Administrator Jay Hakes. He said crude oil and gasoline stocks are not declining as rapidly as had been anticipated and additional oil appears to have reached the market more quickly than expected.

Because of the sharp increase in U.S. gasoline prices, some oil that had been destined for Asia already has been redirected to the American market, easing the supply problem, said Lawrence Goldstein, president of the Petroleum Industry Research Foundation.

Nationally, the average cost of regular grade gasoline was $1.52 a gallon in March, with the average for all grades, including premium, a nickel higher, the agency said.

The EIA in its forecast assumed that additional oil would begin hitting the U.S. market by June as a result of a decision March 28 by the Organization of Petroleum Exporting Countries to boost production by as much as 1.7 million barrels a day. Other non-OPEC producers also have said they would increase production.

Even so, said the forecast, gasoline stocks are likely to remain at the lower end of the normal range through the summer with American motorists expected to use an average of 8.72 million barrels of gasoline a day, or 1.5 percent more than last summer. There are 42 gallons in a barrel.

The prospects of gasoline prices soaring to $2 a gallon this summer and potential shortages have worried the Clinton administration. But Energy Secretary Bill Richardson has said repeatedly that with the additional oil production from OPEC and other producers, prices should gradually recede.

The department's latest price forecast assumes no refining problems with refineries running at nearly 97 percent capacity through the summer. If there are refinery shutdowns, prices would spike higher, the agency said.

Refiners have begun ramping up their output of gasoline, but stocks remain "sharply below last year's level at this time" at about 192 million barrels. The normal range this time of year is 200 million to 220 million barrels.

Although summer gasoline prices will be 25 percent higher than last year, demand is expected to remain strong, exceeding last summer's demand by about 130,000 barrels a day. The agency predicts refiners should have no trouble meeting the increase, barring any major refinery shutdowns.

The report predicted that crude oil prices will continue to drop for the remainder of the year. The delivery price at the refinery was forecast to decline to $25 a barrel by June, compared to nearly $27 a barrel in March. The refinery price is about $2 less than the West Texas Crude price used as a benchmark in the spot and futures markets.

Prices at the refineries are expected to decline to $23.50 by the end of the year and to $21.50 by the end of 2001, according to the forecast. Those prices, however, assume continued increases in world production.

http://www.cnn.com/2000/US/04/06/summer.gasoline.ap/index.html

-- Martin Thompson (mthom1927@aol.com), April 06, 2000


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