Gasoline prices could dip a penny a gallon this summer
04/08/2014 10:41 PM
04/08/2014 10:41 PM
Uncle Sam sees a slight break on gasoline prices this summer — a penny a gallon compared with last summer.
The forecast from the U.S. Energy Department is for a gallon to cost on average $3.57 between now and September, better known as driving season. Kansas City area pumps probably will charge a bit less than that, if history is a guide.
Predicting gasoline prices is a precarious game of weighing political risks and economic forces. And in recent years, the official federal forecast has been reasonably accurate, said James Williams, energy economist for WTRG Economics in Arkansas.
“Subject to supply interruptions, I have no quarrel with their forecast for prices this summer being lower,” Williams said.
The official U.S. forecast for driving season puts gasoline prices at their lowest average since 2010. Its forecast for all of 2014 is $3.45 a gallon, below last year’s average of $3.51 per gallon.
Williams said the economy has recovered slowly and that has kept a lid on growth in gasoline demand. Jobs are the biggest factor in figuring how much fuel Americans burn.
Total employment recently reached pre-recession levels, but Williams said the increase in the population means the percentage of working people is no better than in the recession.
Supplies seem to be in good shape as refiners have stepped up production coming out of their usual maintenance season, though that can affect crude oil prices in the short term.
Crude oil is often the wild card in gasoline price forecasts, as supply interruptions can change markets quickly.
“The price forecast is based on what’s happening with world crude oil prices and our expectations for Brent crude oil,” Adam Sieminski, administrator for the Energy Information Administration, said on a conference call. “Supply, demand and other events might impinge on either of those two things.”
For example, the confrontation in Ukraine could lead to a disruption in Russian oil supplies heading to Europe. Williams said that would force the continent to bid for oil from other sources and drive up prices.
Energy markets jumped higher Tuesday on speculation that U.S. gasoline supplies would decline for the seventh week in a row. The federal supply report is due Wednesday.
“Gasoline stockpiles are heading for a five-year low despite the fact that refineries are raising their operating rates after completing regular maintenance,” said Hong Sung Ki, a commodities analyst at Samsung Futures in Seoul. “Fuel inventories are dropping while we are entering the driving season.”
The Associated Press and Bloomberg News contributed to this report.