U.S. motorists’ recent reprieve from a spring surge in gasoline and diesel prices looks to be short-lived, with crude oil prices poised to increase next year amid expanding global demand, according to an Energy Department report.
West Texas Intermediate crude, the U.S. benchmark, is projected to average $102.50 a barrel in 2012, the Energy Department’s statistical arm said July 12 in its monthly short-term outlook. While that’s down from a previous estimate at $107, the 2012 price would be up 4.1% from an estimated $98.43 average for 2011.
Pump prices in the U.S. have eased over the past two months after oil tumbled from near three-year highs reached in May, providing some relief for produce growers and shippers increasingly squeezed by soaring fuel costs. But oil prices are expected to historically high into next year, reflecting growth in China and limited supply growth from the Organization of Petroleum Exporting Countries, the cartel comprised of Saudia Arabia, Iran and other top crude producers.
The Energy Department “still expects oil markets to tighten as growing liquid fuels demand in emerging economies and slowing growth in non‐OPEC supply maintain upward pressure on oil prices,” according to the report.
Global oil consumption will increase an estimated 1.8% in 2012 to 89.7 million barrels a day, a record, the Energy Department said.
More recently, U.S. motorists’ costs at the pump have declined after prices neared or surpassed $4 a gallon this spring. That partly reflects a recovery in refinery operations in Louisiana and other areas along the Mississippi River following flooding disruptions, according to the Energy Department.
The department lowered its summer forecast for regular-grade gasoline by 4 cents from last month’s outlook, to a nationwide average of $3.71 a gallon. Diesel is expected to average $3.96 a gallon over the summer, down 1 cent from last month.
Still, the projected nationwide gasoline average would be up 34% from $2.76 last summer, while diesel is up 33% from $2.98 last summer.
In 2012, regular-grade gasoline is forecast at an average of $3.65, up 2.5% from a projected $3.56 in 2010, according to the Energy Department. On-highway diesel is expected to average $3.95 next year, up 2.3% from $3.86 this year.
In afternoon trading July 12, crude futures for August delivery on the New York Mercantile Exchange traded around $96.63 a barrel, up 5.7% since the end of 2010 but down from a peak of nearly $115 in early May.
Crude accounts for about 65% of the cost of producing gasoline, with the rest reflecting refining, distribution, marketing and taxes, according to the Energy Department.