The most recent forecast released by the Energy Information Administration indicates that fuel prices should remain elevated for the rest of 2021 and into 2022, though oil prices should start to decline in 2022.
[Above photo via ExxonMobil]
The EIA cautioned in the July update to its Short-Term Energy Outlook that its forecast remains “subject to heightened levels of uncertainty” due to the ongoing economic recovery from the COVID-19 pandemic.
“U.S. economic activity continues to rise after reaching multiyear lows in the second quarter of 2020 [and that] increase in economic activity and easing of the COVID-19 pandemic have contributed to rising energy use,” the agency said. Overall, the EIA expects U.S. gross domestic product to bounce significantly over the next two years – growing by 7.4 percent in 2021 and by 5 percent in 2022 after declining by 3.5 percent in 2020 from 2019 levels.
“We expect rising production will reduce the persistent global oil inventory draws that have occurred for much of the past year and keep prices similar to current levels,” the EIA noted, averaging $72 per barrel during the second half of 2021.
“However, in 2022, we expect that continuing growth in production from OPEC and partner nonmember countries [known as “OPEC+”] alongside accelerating growth in U.S. tight oil production, along with other supply growth, will outpace growth in global oil consumption and contribute to declining oil prices,” it said.
Based on those factors, EIA expects global oil prices based on the Brent price metric to average $67 per barrel in 2022. However, U.S. fuel prices – especially for gasoline – should remain elevated through 2021 and into 2022.
The EIA said U.S. regular gasoline retail prices averaged $2.78 per gallon in the first half of 2021, compared with an average of $2.20per gallon during the first half of 2020.
“In June, monthly retail gasoline prices averaged $3.06 per gallon, the first time the monthly average was more than $3.00 per gallon since October 2014 in nominal terms,” the agency said. “We forecast regular-grade gasoline prices to average $2.92 per gallon in the first half of 2021 and $2.74 per gallon for all of 2022.”
Overall, the EIA said U.S. liquid fuels consumption should increase to 19.6 million barrels per day in 2021 and then to 20.7 million barrels per day in 2022, surpassing consumption levels in both 2020 and 2019 level.