Go ahead, plan that summer vacation trip. If earlier forecasts of gasoline prices between $4 and $5 a gallon made you opt for a "staycation," the latest forecast from the U.S. Energy Information Administration (EIA) may have you packing your bags.
"With falling global crude oil prices over the past month, EIA has lowered the average regular gasoline retail price forecast for the current April-through-September summer driving season to $3.79 per gallon, 16 cents per gallon below the level in the previous Outlook," the agency said in a statement.
While EIA expects regular gasoline retail prices to average $3.71 per gallon in 2012 and $3.67 per gallon in 2013, some industry analysts think actual prices at the pump this summer could be much lower. In a webcast interview on Yahoo Finance this week, Phil Flynn, energy analyst at PFG Best said a variety of factors, including a gloomy outlook for Europe, will push gas prices lower in the short term.
$3 at the pump?
"You're going to see more significant downside pressure on gasoline," Flynn said. "There's a good chance we could test $3 a gallon on a national average pretty soon. This would be nearly a 20 percent drop from the current price level."
Indeed. Today's national average for self-serve regular, as measured by AAA's Fuel Gauge Survey, is $3.75 a gallon. A month ago, prices peaked at about $3.93 a gallon. One year ago, prices had just peaked at $3.985 before starting a long, slow slide.
In addition to worries about the health of the global economy, another reason U.S. gasoline prices are falling - and may be destined to fall even more - is the growing U.S. supply glut. In it's updated outlook this week, EIA said it expects U.S. total crude oil production to average 6.2 million barrels per day in 2012, an increase of 0.5 million barrels a day from last year, and the highest level of production since 1998.
Highest production in 19 years
Forecast lower-48 onshore crude oil production in 2012 averages over 4.3 million barrels per day, reaching its highest level since 1993. Projected U.S domestic crude oil production is expected to increase to 6.4 million barrels per day in 2013, driven primarily by growth in lower-48 onshore production.
While U.S. oil production is rising, demand continues to fall. One reason is higher prices at the pump have forced many consumers to cut out all unnecessary driving. Another factor is the large number of new, more energy-efficient automobiles now on American highways.