By Johnny Jackson
Economists and energy officials are painting a rosier picture for 2009 crude oil prices. They are expecting average gas prices to peak well below last year's record highs.
"The key is the economy," said Neil Gamson, an economist for the Energy Information Administration. "If the economy stays weak - it's expected not to improve until the end of this year or beginning of next year - crude oil prices should remain relatively low."
A deteriorating global economy, coupled with weak oil consumption, has kept the world oil market well supplied, despite the Organization of the Petroleum Exporting Countries' production cuts this winter.
Economists believe the weaker global oil demand and rising production capacity will continue through this summer, reducing the likelihood that oil prices will rise steeply over that period.
"There is a supply-side issue too," Gamson said. "If OPEC makes cuts, as they said they might, that could also push oil prices up."
OPEC may decide to continue production cuts, when it meets in Vienna on March 15, but near-month oil prices will likely be driven primarily by the global economy.
EIA officials project world oil consumption will fall by 1.2 million barrels per day this year, rebounding by as much in 2010 with a recovering global economy.
The agency projects crude oil prices in the U.S. will have increased to an average $54.50 per barrel by 2010, compared to an average $43.14 per barrel projection for this year. Crude oil prices have been holding steady near $40 per barrel, significantly less than the $133 prices experienced only six months ago.
In December 2008, the national average for a gallon of regular unleaded gas was $1.69, the lowest monthly average since February 2004 and almost $2.40 cheaper per gallon than in July 2008.
The EIA projects the average price for a gallon of regular unleaded gas will be significantly lower this year as well - at $1.95 for 2009 and $2.19 for 2010.
Consumers should expect nationwide gas prices to average about $2 this summer, topping out just above $2 by May or June.
Because of lower gas consumption, refining margins for gasoline are expected to remain low for much of 2009 but are expected to increase slightly in 2010 as consumption begins to recover, said Gamson.
Diesel prices, which averaged $3.79 per gallon in 2008, are projected to only average about $2.28 per gallon this year and $2.55 in 2010.