Summer Gasoline Prices to Be High

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Friday April 6 12:34 PM ET Summer Gasoline Prices to Be High

By Tom Doggett

WASHINGTON (Reuters) - U.S. drivers can expect to pay an average $1.49 a gallon for gasoline this summer, 4 cents less than last year's record, but the second highest in two decades with room to spike higher, the government warned on Friday.

``The general tightness of domestic supply leaves the U.S. gasoline market vulnerable to sharp price run-ups if supply disruptions or bottlenecks occur,'' the Energy Information Administration said.

In its official outlook for the busy driving season that runs from April to September, the Energy Department's statistical arm said gasoline prices will peak at $1.52 a gallon in June and then gradually decline to $1.43 by December. Regular unleaded fuel averaged $1.44 nationwide this week.

After last year's peak, this summer's average will be the historical second highest pump price in the United States since 1981, though far lower than some countries in Europe and Asia with much higher taxes.

Despite a slowing U.S. economy, U.S. gasoline demand should average 8.59 million barrels per day (bpd), up 0.6 percent or 54,000 barrels bpd from last year.

EIA officials said consumers are used to higher gasoline prices, and therefore will not cut back on their driving and fuel use as much.

Due to tighter gasoline supplies, refineries will have to increase their output by 150,000 bpd, or 1.8 percent, from last summer's production levels to meet expected demand.

Gasoline stocks will be especially low in East Coast, Midwest and Gulf Coast states, the EIA warned.

``While another Midwest price shock is not inevitable, it is certainly not a long-shot either, as Midwestern gasoline stocks are lower than last year,'' the agency said.

Last summer, retail prices spiked as high as $2.75 a gallon in Chicago and Milwaukee. The Midwest has proven particularly vulnerable to short-supply and price spikes, since it is a net-importer of refined products and since many of its larger cities have environmental fuel standards that only a limited number of plants can match.

The EIA estimated overall domestic refinery and field gasoline production during the summer period at 8.48 million bpd, up 190,000 bpd from last year.

Gasoline imports will have to make the up difference between domestic production and demand. The EIA forecast imports of 230,000 bpd, close to the 225,000 bpd imported last year.

While gasoline use will be up, overall demand for petroleum products will be less than previously thought due to the slowing economy, the EIA said in yet another downward revision this year.

It said U.S. petroleum consumption is expected to grow by 1.1 percent this year to an average 19.71 million bpd, down from the 1.4 percent the agency had forecast last month, less than the 1.7 growth rate forecast in February, and much lower than the 2.3 percent rate projected in January.

U.S. oil product demand last year was 19.49 million bpd.

Less oil use reflects the slowing U.S. economy, which the EIA said it expects to expand at a rate of 1.9 percent this year, lower than the 2.2 percent growth rate the agency forecast last month.

``The current economic slowdown, which began during the second half of 2000, is now projected to be deeper and longer than previously thought,'' the EIA said.

For the current quarter and the upcoming summer third quarter, the agency lowered its estimate for U.S. demand for oil products by 90,000 bpd in each period. http://dailynews.yahoo.com/h/nm/20010406/bs/energy_gasoline_dc_2.html

-- Carl Jenkins (somewherepress@aol.com), April 06, 2001


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