U.S. Oil Boom Dents Gasoline Prices
Despite domestic supply glut, global demand, inflation temper price declines at pump
WASHINGTON -- The United States may be awash in crude oil, but that has not proven to be a game changer when it comes to gasoline prices.
In an interview with energy news site Oilprice.com, AAA spokesperson Michael Green said the U.S. oil boom has helped lower gasoline prices. "Cheaper domestic crude has a significant effect on the price most of us pay at the pump," he told the news website. "U.S. refineries have access to cheaper crude oil than their overseas competitors, which provides a lucrative business advantage."
Gasoline prices have fallen as U.S. oil production has risen, Green said. While the national average for regular gasoline in the spring of 2011 peaked at $3.98, it should stay below $3.65 per gallon this spring, according to projections from the Energy Information Administration (EIA). Currently, the national average price is $3.596 per gallon.
"Without the surge in domestic crude-oil production and expanded refinery capacity, it is likely that drivers in most parts of the country would be paying at or near $4 per gallon this spring for gasoline," Green added.
A couple exceptions: Hawaii and California, which are both averaging higher than $4 per gallon.
EIA recently reported that U.S. crude-oil reserves at the beginning of 2013 were at their highest level since 1976. Fed by the shale oil and gas boom, domestic oil production should hit 9.6 million barrels per day before 2020, the highest level of production in more than 40 years.
And stockpiles of crude oil in the Gulf Coast hit a record 202 million barrels this week, Bloomberg reported. This, according to Bank of America forecasts, could widen the gap later this year between the U.S. benchmark West Texas Intermediate and the global benchmark Brent to $13 per barrel. EIA forecasts an average gap of $9 gap for 2014.
Despite the supply glut in the United States and cheaper domestic crude, however, gasoline prices have not fallen further due to global dynamics, including rising demand in China and the developing world. And inflationary pressure has a role; after adjusting for inflation, the $2.09 per gallon national average for this past week in April 2009 would be $2.29 today, said Oilprice.com.
But this summer should see a moderation in prices, EIA said, at least when compared to last year. The agency recently released its summer fuels outlook, projecting that regular gasoline will average out at $3.57 per gallon, vs. $3.58 per gallon for summer 2013. On a regional basis, the West Coast will hit above the national summer average at $3.85 per gallon, while the remaining regions will average below it, with the Gulf Coast the lowest at $3.37 per gallon.
EIA forecasts summer diesel prices to average out nationally at $3.87 per gallon, two cents per gallon lower than summer 2013. The agency predicts a slight increase in gasoline consumption this summer compared to last of 0.09 million barrels per day, with a forecasted increase in vehicle miles traveled held down by increases in fuel economy.