Energy prices expected to plateau this winter

By Johnny Jackson


U.S. energy officials are expecting energy prices to plateau and hold steady through the winter months, depending on the strength of the economic recovery.

The U.S. Energy Information Administration (EIA) reported Tuesday, in its monthly short-term energy outlook, expectations that crude oil prices will average about $76 per barrel through March, dipping as low as $75 per barrel for the months of January and February.

The year-round average crude prices, however, are expected to climb above what was experienced this past year, according to Neil Gamson, an economist with the EIA.

"We're projecting that next year's crude oil prices will average almost $79 per barrel compared to $62 this year," Gamson said. "In that assumption is the continued economic improvement, domestically and globally."

Gamson anticipates energy prices will rebound alongside a rebounding economy. He said that while the current EIA forecast for the monthly, average crude price is expected to dip to $75 per barrel by early next year, the monthly average is projected to rise to $82 per barrel by December 2010.

The 2010 projections, he added, are largely dependent upon whether national and global economic conditions continue to improve in 2010.

Economic conditions have appeared to improve recently with the strengthening of the U.S. dollar and increasingly large crude oil supplies, said Gregg Laskoski, spokesman for AAA Auto Club South.

Laskoski said retail gasoline prices have continued to rise, however.

"During the past week, the national average increased by one cent per gallon and in Florida, Georgia, and Tennessee," added Laskoski. "Each state's average price also increased by one cent per gallon respectively. [Meanwhile,] U.S. refinery output is meeting current demand, even using just 79 percent of its available capacity."

Crude oil on the New York Mercantile Exchange (NYMEX) closed the week of Nov. 30 at $75.47 per barrel, compared to $76.05 per barrel the week of Nov. 23. National gas prices increased by about one cent over those two weeks, from $2.62 per gallon of regular unleaded gasoline to $2.63, according to AAA's Daily Fuel Gauge Report.

"Ordinarily, crude oil prices and retail gasoline prices move in the same direction," Laskoski said. "The national, average wholesale price closed each week in November between $2.02 and $2.05 per gallon and retail fuel prices reflected that, but whether that price stability continues in December remains to be seen."

Rising crude oil prices may contribute to an increase in the annual average regular-grade gasoline retail price from $2.35 per gallon in 2009 to an anticipated $2.83 per gallon in 2010, said Gamson.

Gamson doesn't expect gasoline prices to rise through the remainder of the year.

"We don't see too much movement with gasoline prices until sometime next spring," Gamson said. "Prices will probably be pretty flat until about March of next year, and that includes diesel."

The EIA projects annual average diesel fuel retail prices will be $2.46 and $2.96 per gallon, respectively, in 2009 and 2010.

The short-term energy forecast includes an anticipated increase in average household expenditures for heating oil, from $1,864 last winter to $1,911 this winter.

The forecast also indicates a potential 13 percent decrease in propane costs for the average household, from $1,950 last winter to $1,700 this winter.

He said projected average household expenditures on natural gas total $778 this winter, compared with $889 last winter.

"Our natural gas assumptions changed a little bit [from earlier projections], because there is so much gas out there in storage," Gamson said.