WASHINGTON — A more than 40% drop in crude prices is going to pull the average retail price for gasoline this summer to a six-year low.
That’s the latest projection in the Energy Information Administration’s (EIA) July Short-Term Energy Outlook (STEO). EIA expects retail gas prices this summer—covering the months of April through September—to average out at $2.67 per gallon. Adjusted for inflation, this would be the lowest average price since 2009.
EIA cites a projected 41% year-over-year drop in the average price of North Sea Brent crude for the decline.
Partly thanks to the relatively low prices, EIA expects travel and gas consumption to beat 2014 levels. Vehicle miles traveled is projected to grow 2.2% this summer compared to last, which would be the greatest year-over-year summer jump in more than a decade. Also fueling this travel boom: a 3.6% increase in real disposable income for this summer vs. last, marking the greatest year-over-year growth in nine years, and a 2.1% projected rise in nonfarm employment, the biggest increase in 15 years.
EIA anticipates a 2.1% bump in consumption, or the equivalent of an extra 194,000 barrels per day (bpd), for this summer compared to last. Lower gas prices and higher disposable income, employment and consumer confidence will drive the increase, EIA said.
When determining consumption, EIA considers a combination of product supplied—refinery and blender output—as well as the change in inventory and net imports. To this end, the agency projects the increase in net refinery and blender output of gasoline to keep somewhat ahead of the growth in consumption, or up by 208,000 bpd. Inventories of gasoline and gasoline blending components were 10.7 million barrels above the five-year average at the start of this summer; EIA expects them to end up 3.7 million barrels above the average by the summer’s end.
EIA is projecting a 14.3 million-barrel draw in gasoline inventories this summer, versus an 8.4 million draw in summer 2014. Increased production and the larger inventory draw should push net imports of gasoline and blending components down by 62,000 bpd versus last summer.