Summer gasoline demand to fall

U.S. summer gasoline demand will shrink for the first time since 1991 as skyrocketing pump prices and the wider economic malaise hit holiday plans, the U.S. Energy Information Administration forecast Tuesday.

With some regions seen facing the shock of $4 a gallon gasoline this summer, fuel demand could contract 0.4% from 2007 as U.S. cars and gas-guzzling sport utility vehicles spend more time in driveways.

It would be the first decline in summer gasoline use since a recession choked the U.S. economy 17 years ago. Many analysts forecast that this year’s housing crisis, credit crunch and high oil prices could cause an economic contraction.

“The economy did have a slight recession in 1991, so that’s one similarity between that year” and this year, agency administrator Guy Caruso said. “We are projecting a small recession for the first half of the year.”

Meanwhile, several U.S. senators urged the Federal Trade Commission to prohibit manipulation in petroleum markets.

“Record energy prices and industry profits are coming at a time when supply and demand suggest that prices should be significantly lower,” said Sen. Olympia J. Snowe (R-Maine).

Even though gasoline inventories hit a 15-year high on April 1, the energy administration forecast record gasoline prices, citing expensive crude oil. The agency said crude would average $97 a barrel this summer, up $30 from last year.

Gasoline prices will peak in June at an average $3.62 a gallon, the agency predicted, with an average of $3.54 for April-September, up 61 cents from the previous driving season.

Truckers also will feel the sting at the pumps, with diesel prices to average $3.73 a gallon this summer, up 88 cents from last year, after hitting a monthly peak of $3.91 in April.

U.S. crude shot to a record $111.80 a barrel in March as investors seeking to hedge against inflation rushed into commodities, helping to push retail gasoline prices to an all-time average high of $3.33 a gallon this week. In California, the average price of a gallon of self-serve regular climbed to $3.685.

The energy administration now forecasts the price of oil -- which accounts for 70% of the cost of making gasoline -- should average over $100 a barrel for 2008, and $103 in May and June.

Strong oil demand outside the United States should keep crude prices high this year, despite large fuel supplies and tepid demand in the world’s top oil consumer, the agency said.

“The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices,” the agency said.

In absolute terms, the agency forecast that U.S. summer gasoline demand should slip to 9.404 million barrels per day during the first half of 2008, down 36,000 barrels from last year.

A U.S. economic turnaround in the second half should push annual growth to 1.2% for the year, still the lowest rate since 2001, the agency said.

Lower U.S. fuel demand should drag down gasoline imports this summer by 91,000 barrels per day to 1.074 million against year-earlier levels, while domestic gasoline production should fall 20,000 barrels per day to 8.241 million.