DES MOINES, Iowa -- Motorists this year will see gasoline prices as much as 40 cents below the 2012 average, and the price is more likely to dip below $3 per gallon than reach $4, an energy analyst said Wednesday.
"Gasoline prices averaged $3.60 per gallon last year, and we think they'll average between $3.25 and $3.50 per gallon this year," said Robert Gough, director of content development for the consulting firm Oil Price Information Services.
He said prices may spike to as high as $3.90 around Memorial Day as refiners switch over to summer blends and the nation readies its supplies for summer driving.
But after that, prices will cool again, barring major international shocks, and Gough didn't rule out gas prices below $3 per gallon.
Gough's forecast runs parallel to the U.S. Department of Energy, which forecasts retail prices to average $3.44 this year and $3.34 per gallon in 2014.
Diesel fuel used by truckers and farmers averaged $3.97 per gallon during 2012, and that is forecast by the Energy Department to fall to an average of $3.87 per gallon in 2013 and $3.78 per gallon in 2014.
Those prices will still be higher than the $2.34 per gallon average in 2010 and $2.78 per gallon in 2011, but that will be some relief from the record levels of 2012.
After nearing $4 per gallon last spring, gasoline prices slowly went down in the second half of 2012, in part because of slack demand due primarily to better fuel standards in newer-model automobiles. A surge in energy production in the U.S. also brought some relief.
Since 2008, all U.S. domestic production is up 17 percent to 6.4 million barrels per day by the end of 2012. In the lower 48 states, the massive new Bakken Field in North Dakota has pushed up production by 30 percent in the last four years.
Gough said that because the major increases in U.S. oil production have come in the Central Time Zone, the Midwest will enjoy some of the lower gasoline prices in the U.S.
"The Midwest should see some discounts on its oil and gasoline prices because of the new production," Gough said. "The East and West Coast markets are still the biggest and pull the most oil, driving the prices, but more oil will be available to the Midwest."
Gough said energy prices will vary sharply around the U.S. this year. Energy Department figures show that last week retail prices ranged from around $3.05 per gallon in Colorado and other Rocky Mountain states to $3.45 per gallon on the East Coast.
California, averaging $3.75 per gallon, led prices on the U.S. mainland.
-- Domestic production of U.S. crude oil has increased significantly in the last four years, according to the U.S. Department of Energy. In 2008 production from the 50 states averaged 5.48 million barrels per day. By 2012 that average rose to 6.43 million barrels per day.
-- The impact of North Dakota production can be seen in production from the Lower 48 states, which rose from 4.32 million barrels per day in 2008 to 6.38 million barrels per day by last December.
-- Projected domestic crude oil production is expected to continue to increase to 7.3 million barrels per day in 2013 and 7.9 million barrels per day in 2014, which would mark the highest annual average level of production since 1988, although still below the peak domestic production of more than 9 million barrels per day in the early 1970s.
-- In response to higher domestic crude oil production, both imports and biofuel production fell in the U.S. in 2012. U.S. oil imports dropped 10 percent last year to about 7.9 million barrels per day. Ethanol production was down an average of 15.6 percent by December 2012, from a year earlier.
-- Average crude oil prices in 2012 were at historically high levels for the second year in a row. European Brent crude oil averaged $111.67 per barrel, slightly above the 2011 average of $111.26. West Texas Intermediate oil averaged $94.05 per barrel in 2012, down slightly from $94.88 in 2011.
Source: U.S. Department of Energy
By Dan Piller
The Des Moines Register