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Short-Term Energy Outlook

Highlights
  • West Texas Intermediate (WTI) and other crude oil spot prices have risen about $15 per barrel since mid-February partly in response to the disruption of crude oil exports from Libya.  Continuing unrest in Libya as well as other North African and Middle Eastern countries has led to the highest crude oil prices since 2008.  As a result, EIA has raised its forecast for the average cost of crude oil to refiners to $105 per barrel in 2011, $14 higher than in the previous Outlook.  However, EIA has raised its 2011 forecast for WTI by only $9 per barrel to $102 per barrel because of the projected continued price discount for this type of crude compared with other crudes.  EIA projects a further small increase in crude oil prices in 2012, with the refiner acquisition cost for crude oil averaging $106 per barrel and WTI averaging $105 per barrel.  EIA's forecast assumes U.S. real gross domestic product (GDP) grows 3.3 percent in 2011 and 2.8 percent in 2012, while world real GDP (weighted by oil consumption) grows by 3.8 percent and 3.7 percent in 2011 and 2012, respectively.
§  The recent rapid increase in spot crude and gasoline prices has led to a significant rise in retail product prices.  Motorists currently experiencing a jump in pump prices will likely see further increases from now through the spring since the recent increase in crude oil prices has not yet been fully passed through to gasoline prices.  EIA expects the retail price of regular-grade motor gasoline to average $3.56 per gallon in 2011, 77 cents per gallon higher than the 2010 average and about 40 cents above the projected price in the previous Outlook.  EIA projects gasoline prices to average about $3.70 per gallon during the peak driving season (April through September) with considerable regional and local variation.  There is also significant uncertainty surrounding the forecast, with the current market prices of futures and options contracts for gasoline suggesting a 25-percent probability that the national monthly average retail price for regular gasoline could exceed $4.00 per gallon during summer 2011.  Rising crude oil prices are the primary reason for higher retail prices, but higher refining margins are also expected to be a contributing factor.
  • EIA estimates that natural gas working inventories ended February 2011 at 1.7 trillion cubic feet (Tcf), slightly below the 2010 end-of-February level.  Inventories are expected to remain relatively high through 2011.  The projected Henry Hub natural gas spot price averages $4.10 per million Btu (MMBtu) in 2011, $0.29 per MMBtu lower than the 2010 average.  EIA expects the natural gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58 per MMBtu.

To see details of this forecast update, go to the following World Wide Web site on the Internet:

http://www.eia.doe.gov/emeu/steo/pub/contents.html

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