Summer fuel costs expected to inch up

U.S. motorists can expect higher pump prices in the months ahead, but gasoline will cost less on average than last summer and supplies will be plentiful, the government said Tuesday.

The national price for regular gasoline this summer is expected to average $2.81 a gallon, down 3 cents from last summer, and to reach a monthly peak of $2.87 in May, the Energy Information Administration said. California drivers probably won’t see summer prices drop below $3 a gallon on average, the agency said.

The administration’s summer forecast runs from April to September, typically the biggest demand period for motor fuels in the United States.

The average pump price already hit $2.802 a gallon this week. But gasoline costs are much higher in certain areas of the country, with Californians paying an average $3.252.

In its annual summer forecast, the Energy Department’s analytical arm said gasoline demand this summer would be up 1.2% to 9.5 million barrels a day and motor fuel production would be 1.1% higher at 8.6 million barrels a day.

Gasoline imports will help close the gap between supply and demand, with shipments to the U.S. market averaging 1.1 million barrels a day this summer, the administration said.

“I think that we will see that supply will meet the demands of the driving season that is upcoming this summer,” Energy Secretary Samuel Bodman told reporters Tuesday, shortly before the administration released its summer forecast.

However, it warned that growing demand for imported gasoline by OPEC members Iran, Nigeria and Venezuela “could constrain the availability” of motor fuel shipments to the United States this summer. Although the three countries have huge crude oil reserves, they have limited refining capacity, and their governments subsidize gasoline prices for citizens, which increases fuel demand.

Bodman said high crude oil prices and U.S. refinery outages had “added to uncertainties in the marketplace.”

Traders are closely watching gasoline supplies in the United States before the peak summer driving season. Motor fuel inventories have dropped nearly 10% since early February amid oil refinery outages.

Still, the administration said U.S. gasoline inventories hit 205.1 million barrels at the April 1 start of the summer driving season, down 4.4 million barrels from a year earlier but within the previous five-year average.

Unlike last summer, when refiners had problems switching over to mixing ethanol with gasoline, more U.S. ethanol plants have come on line, boosting supply by close to 28%. U.S. ethanol production this summer is forecast to average 399,000 barrels a day, up from 313,000 barrels a day last summer, the administration said.

Many energy experts say gasoline would have to soar to $4 a gallon before U.S. consumers cut back on their daily driving.