The Energy Department Monday predicted sharply
higher gasoline prices this summer even if the world's oil
producers agree later this month to increase production.
"Retail gasoline prices are poised to surge to unprecedented
levels before the spring is out," said the report by the Energy
Information Administration.
It said U.S. gasoline stocks "remain alarmingly low" and as
far as the gasoline market is concerned the country "is moving
into uncharted territory."
And government analysts forecast that if higher oil production
is put off until the fall, there likely will be a repeat of the
soaring heating-oil prices that have plagued the Northeast this
winter.
"World oil prices should remain high for most of the year as
inventories are expected to remain low, even with an assumed
increase in OPEC production of 1 million barrels per day," the
government analysis said.
The forecast by the Energy Department's statistical agency said
gasoline prices, already nudging near $1.50 a gallon on average
nationwide, well continue to increase and could easily reach the
$1.75 to $1.80 a gallon range during the peak driving summer months
and spike even higher in some areas.
An oil production increase of 1.7 million barrels worldwide
using one hypothetical scenario put into place immediately could
drive down oil prices from nearly $32 a barrel to $25.50 a barrel,
the agency said. But even that would not impact gasoline prices
this summer, it added.
Members of the Organization of Petroleum Exporting Countries are
scheduled to meet March 27 to decide whether to increase oil
production and ease an acute crude-oil shortage worldwide.
Worldwide consumption is 2 million barrels a day greater than
supply. A barrel is 42 gallons.
Three major producers Saudi Arabia, Venezuela and Mexico
have already said they will recommend some production increases and
another producer, Kuwait, has signaled a willingness to go along.
But the analysis released Monday by the Energy Department's
statistical agency suggested that even major production increases
of 2.5 million barrels a day, if begun immediately, would not head
off significantly higher gasoline prices this summer.
The agency concluded that the additional oil would not show up
in time to suppress gasoline prices as Americans take to the road
for the summer historically the busiest driving season of the
year.
The government forecast no easing of gasoline prices in May and
June, with average nationwide prices heading conceivably into the
$1.70-a-gallon range and possibly higher, sources familiar with the
report said.
That assumes an increase in oil production.
The analysis used a number of production scenarios, from OPEC's
delaying additional oil production until the fall to a decision to
pump an additional 2.5 million barrels a day, beginning in April.
None of the scenarios was shown to have much of an impact in
short-term gasoline prices heading into the summer, said the
source, who spoke on condition of anonymity. It would take time for
the new supplies to work into the system.
Just over a year ago, OPEC oil producers cut production by 4.3
million barrels a day after seeing world oil prices plummet because
of a supply glut.
Since then, oil prices have soared from $10.72 a barrel on Dec.
10, 1998, to $31.78 a barrel Monday on the New York Mercantile
Exchange.