Motorists Likely To Escape A Repeat Of Summer ‘96 Declining Cost Of Crude Oil, Mild Winter Set Stage For Smaller Increases In Gas Prices

Motorists can expect just modest gasoline price increases this year as the summer driving season approaches, the Energy Department said Thursday, citing declining crude prices and a mild winter.

“Drivers will not see the kind of price shocks they did last spring,” Jay Hakes, director of the department’s Energy Information Administration, said at a news conference.

The agency predicted that average prices for all brands of gasoline will be $1.31 a gallon nationwide, peaking about 3 or 4 cents higher than that in July. Prices will fluctuate among regions and unleaded regular, which is the most widely sold gasoline, will be somewhat cheaper, the department said.

That’s several pennies lower than last summer’s average gasoline prices, a year that saw an upward spring price spiral of 20 cents a gallon, peaking at $1.38 a gallon on average.

The agency, in its energy review and forecast for 1997, also said:

A mild winter helped ease what had been expected to be soaring heating oil prices. Prices peaked at below $1.10 cents a gallon on average as lower than expected demand eased inventory pressures.

Inventories of gasoline continue to be lower than historic levels, but that refineries, again because of the mild winter, are in good shape to step up production to meet demand.

Natural gas prices are expected to remain stable after increasing sharply last year.

Hakes said that the expected moderations in gasoline prices were partly due to adequate inventories as well as declining crude prices, which have dropped $4 since January. He said the tightening crude supply picture that marked 1996 seems to have eased with increased production and previously unavailable supplies from Iraq.

The agency predicted crude prices would not rise significantly.

“We’re projecting that crude oil will hang in the $20 range pretty much the next two years,” said Hakes, although adding that the price of crude “like the weather is pretty hard to predict.”

On the gasoline front, Hakes said “this year we don’t see a lot of sticker shock.”

Prices this summer should increase “about 4 to 5 cents a gallon” from what they currently are, said Hakes.

Hakes acknowledged that prices still are somewhat higher than they were two years ago, but he added that he did not think gasoline prices increased much beyond general inflation. He suggest that prices in 1995 and at the beginning of 1996 were abnormally low.

The EIA estimated that for the sixth straight year summer gasoline demand will increase in 1997 to 342 million gallons a day. Motorists are expected to travel nearly 7.3 billion miles a day this summer.

Prior to 1992, summer gasoline demand declined steadily despite yearly increases in miles driven because more fuel efficient automobiles were being introduced into the fleet, according to the EIA. That trend changed five years ago, however, as more gas guzzlers - including trucks and sport utility vehicles - began to be sold.

“Now we’re kind of in a holding pattern” as far as fuel efficiency is concerned, said Hakes. “We don’t see a lot of gain in efficiency in the coming years.”