WASHINGTON — Falling crude oil prices continue to push the U.S. regular gasoline retail price down, according to the U.S. Energy Information Administration’s latest Short-Term Energy Outlook (STEO), while lower natural gas working inventories are sending projected spot prices higher for this year and next.
The U.S. regular gas retail price reached a year-to-date high of $3.78 per gallon on Feb. 25 but had fallen to $3.52 per gallon by April 29. EIA expects the price will average $3.53 per gallon over the summer (April through September), down 10 cents per gallon from last month’s STEO. The annual average is projected to decline from $3.63 per gallon in 2012 to $3.50 per gallon this year to $3.39 per gallon in 2014.
EIA warns that energy price forecasts are highly uncertain, and that the current values of futures and options contracts suggest that prices could differ significantly from the projected levels.
After increasing to $119 per barrel in early February, the Brent crude oil spot price fell to a low of $97 per barrel in mid-April and then recovered to $105 per barrel on May 3. EIA expects that the spot price will average $104 per barrel over the second half of 2013 and $101 per barrel in 2014. The projected discount of West Texas Intermediate (WTI) crude oil to Brent, which increased to a monthly average of more than $20 per barrel in February, fell to below $9 per barrel in April. EIA expects the discount to increase in the near term and average $13 per barrel in 2013 and $9 per barrel in 2014.
Natural gas working inventories ended April at an estimated 1.82 trillion cubic feet (Tcf), about 0.80 Tcf below the level at the same time a year ago and 0.13 Tcf below the five-year average (2008-12).
EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.80 per MMBtu in 2013 and $4 per MMBtu in 2014, about 27 cents per MMBtu and 40 cents per MMBtu higher than forecast in last month’s STEO, respectively.
The projected increasing cost of natural gas relative to coal contributes to higher levels of electricity generation from coal. The share of total generation fueled by coal is forecast to increase from 37.4% in 2012 to 40.1% in 2013. Conversely, the share of generation fueled by natural gas declines from 30.4% in 2012 to 27.8% in 2013.