Dreary weather and dreams of summer encouraged me to go on the internet the other day to search for places to stay when we take our summer vacation in Sebago Lake, Maine. In between contemplating cottages, motels and B&B's, I started to think of the energy cost of driving there from New Jersey.
I had some help from the Energy Department, which just released its monthly forecast for energy supplies and prices. There was good news for me, and for you. The quick message is that crude oil prices and gasoline prices will remain relatively stable for the rest of the year.
The report says that gasoline, nationally, will average $1.96 per gallon this year, about where it is now. That means crude oil, the raw material for gasoline, also will be about $42 a barrel. That may be good news for anyone planning a long car trip this summer.
Crude oil averaged $100 per barrel in 2008, while gasoline sold for an average of $3.26 per gallon. I remember paying well over $4.00 per gallon for gasoline last June, and wondering how high it could go. But that seems like a long time ago.
The world economy is in such turmoil now that the people who know a lot more about economics than I do have sharply lowered their expectations for this year. In June 2008, the Energy Department's Energy Information Agency forecast 2009 world economic growth at 4.2 percent. By September, that expectation was lowered to 3.8 percent. More recently, expectations of economic growth have turned to projections of economic decline and now EIA sees the world economy falling by 0.8 percent this year. That directly impacts oil consumption and prices.
If you make regular trips to the gas station like I do, you've probably noticed that gasoline prices have been relatively stable since the large declines that occurred during the second half of last year. Until there is an economic recovery, which experts say won't begin until at least the end of 2009, we're unlikely to see big price moves at the pump.
Also, such high gasoline prices a year ago have already had a significant impact on consumption. Almost everyone knows someone who has bought a smaller car or at least changed their driving habits. Even my twenty-five-year-old stepson, who loves his Toyota Tacoma truck, is thinking of buying a Yaris. The threat of a return to $4.25 gasoline in the U.S. may have permanently shifted attitudes toward gasoline use. So, even if the economy starts to climb out of its slump later this year, the ratio of economic growth to gasoline consumption may have been significantly altered.
OPEC is meeting on March 15 to make decisions about members' future oil production, and if they cut back significantly this could at least help to sustain stable oil prices, and, in turn, gasoline prices. But sloppy demand seems to be the factor driving fuel prices right now. I'm counting on gasoline being under $2.00 per gallon this summer. The loons on Sebago Lake are beckoning. Of course if everyone has similar vacation ideas in August, the cost of our 10-hour drive could be more than I think!