The EIA said it expects that the price of West Texas Intermediate (WTI) crude oil, which averaged $62 per barrel in 2009, will average about $80 and $84 per barrel in 2010 and 2011, respectively. The forecast assumes that U.S. real gross domestic product (GDP) [image-nocss] grows by 2% in 2010 and by 2.7% in 2011, while world oil-consumption-weighted real GDP grows by 2.5% and 3.7% in 2010 and 2011, respectively.
Escalating crude oil prices will drive the annual average regular-grade gasoline retail price from $2.35 per gallon in 2009 to $2.84 in 2010 and $2.96 in 2011. Pump prices are likely to pass $3 per gallon at some point during the upcoming spring and summer. Projected annual average diesel fuel retail prices are $2.98 and $3.14 per gallon, respectively, in 2010 and 2011.
Monthly average regular-grade gasoline prices increased from $1.79 per gallon in January 2009 to $2.61 per gallon in December 2009. The EIA said that expects these prices to average $2.84 per gallon in 2010 and $2.96 per gallon in 2011. Because of growth in motor gasoline consumption, the difference between the average gasoline retail price and the average cost of crude oil will widen in 2010 before starting to level out in 2011.
On-highway diesel fuel retail prices, which averaged $2.46 per gallon in 2009, average $2.98 per gallon in 2010 and $3.14 in 2011. As with motor gasoline, the expected recovery in the consumption of diesel fuel in the United States, as well as growth in distillate fuel usage outside the United States, strengthens refining margins for distillate throughout the forecast period, the EIA said.
Click here to view the full report.Meanwhile, Darin Newsom, senior analyst with Telvent DTN, a financial markets research firm based in Omaha, Neb., told CNNMoney.com that it looks like there is momentum in the commodity markets. That should lead to higher oil and gasoline prices. "Gas is going to continue go higher because the commodity markets in general seem to be on the run right now," he said, adding that oil could approach $90 before cooling off and that gasoline might head toward $3 a gallon as a result.
That could be a problem for consumers, said the report. Some economists think that $3 a gallon for gasoline could lead to a noticeable change in consumer spending behavior.
Regular-grade gasoline prices have already surpassed that level in California, as well as Alaska and Hawaii. Premium-grade gasoline costs more than $3 a gallon in 17 states and Washington, D.C.
Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida in Orlando, told CNNMoney that consumer spending might not fall dramatically if gasoline prices simply topped $3 nationwide and did not rise much higher. Considering that $3 gasoline would still be 34% below the all-time high price set in July 2008, Snaith thinks that $4 would be a true tipping point for consumers.
"Oil prices will go up over 2010," Chris Probyn, chief economist with State Street Global Advisors in Boston told CNNMoney. "We may get short-term relief once the cold spell is over, but energy prices will be higher than they were at the end of 2009."
Probyn also thinks that gasoline prices would have to head much higher before they had a major impact on spending. "The effect isn't big enough yet to derail a recovery, but it is obviously a drain on purchasing power if you have to pay more for gas," he said.
And U.S. gasoline consumption fell to the lowest level in more than 13 months as Americans drove less between Christmas and New Year's Day, reported Bloomberg, citing MasterCard Inc.'s SpendingPulse survey. Motorists bought 8.93 million barrels of gasoline a day in the week ended January 1, the lowest level since Nov. 14, 2008. Demand fell 3.5% from the prior week, the biggest drop since July 10, and is down 6.7% in two weeks.
"Gasoline consumption decreased sharply again, down 2.27 million barrels due to the holidays," said Michael McNamara, vice president of research and analysis for MasterCard Advisors SpendingPulse.
The last time gasoline demand fell below 9 million barrels was the week ended Sept. 11, 2009.
The biggest declines last week were on the Gulf Coast and West Coast, where consumption fell 5.8% and 5.2% respectively, "due to weather," McNamara said. The smallest drop was in the Central Atlantic region, which includes New York and Pennsylvania. Demand in that area was down 0.8%.
Consumption was down 0.4% from a year earlier. Average demand for the four weeks ended January 1 was 9.26 million barrels a day, up 1.2% from a year earlier.
The survey from Purchase, N.Y.-based MasterCard is assembled by MasterCard Advisors, the company's consulting arm. The information is based on credit-card swipes and cash and check payments at about 140,000 U.S. gas stations.
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