Summer gasoline prices expected to be highest in four years

Recent forecasts from the U.S. Energy Information Administration (EIA) predict that prices for regular gasoline will this year reach their highest summer average in four years.

EIA’s Short-Term Energy and Summer Fuels Outlook forecasts that U.S. drivers will pay an average of $2.74 per gallon (gal) this summer for regular gasoline.

The forecast for summer 2018, April through September, is 26 cents/gal higher than the average price last summer. Overall gasoline expenditures in 2018 are anticipated to be approximately $2,300, or $200 more per household than in 2017.

According to EIA predictions, monthly average gasoline prices will reach a peak of $2.79/gal in May and drop to $2.65/gal in September.

Gasoline prices are typically higher in the summer when gasoline demand is higher. During the summer months, federal and state environmental regulations require the use of summer-grade gasoline, which is more expensive to manufacture.

For all of 2018, EIA forecasts U.S. regular gasoline prices to average $2.64/gal.

The increase is largely due to changes in crude oil prices, which have increased in part because of extensions to the coordinated crude oil production reductions by the Organization of the Petroleum Exporting Countries (OPEC). EIA forecasts that Brent crude oil will average $63 per barrel (b) or $1.50/gal this summer, which is approximately $12/b or $0.29/gal above last summer’s numbers.

EIA predicts wholesale gasoline margins for this summer to average 46 cents/gal, approximately two cents/gal lower than last summer. Wholesale gasoline margins represent the difference between the wholesale price of gasoline and Brent crude oil price.

EIA forecasts that increased gasoline exports and domestic consumption will lead to higher gasoline yields this summer. According to EIA predictions, gasoline production will average approximately 170,000 barrels per day (b/d) more than last summer.

EIA anticipates U.S. motor gasoline consumption in summer 2018 to average 9.6 million b/d, an increase of 0.2 percent over last summer. Summer highway travel is forecast to increase by 1.3 percent, but its impact on motor gasoline use will in part be offset by a 1.2 percent increase in fleet-wide fuel efficiency.

The Gulf Coast region, as defined by Petroleum Administration for Defense Districts, is expected to have the lowest average summer retail gasoline prices at $2.45/gal, while the West Coast region will see an average of $3.22/gal.