This is an excerpt from EERE Network News, a weekly electronic newsletter.

September 10, 2003

EIA Report Examines High Costs of Gasoline and Natural Gas

The average price for gasoline in the United States hit a record high of $1.75 per gallon on August 25th, according to DOE's Energy Information Administration (EIA). EIA's "Short Term Energy Outlook," released on Monday, noted that gasoline prices surged by 20 cents per gallon for the last three weeks of August. The report attributed the high prices to tight supplies, heavy demand, and a series of local supply disruptions. Among the disruptions was the August 14th blackout, which shut down several refineries in the Midwest; a pipeline rupture in Phoenix, Arizona; and refinery shutdowns in California. Noting that spot wholesale prices for gasoline fell by about 30 cents in the first week of September, the EIA expects retail gasoline prices to decline in the coming weeks.

Meanwhile, hotter weather in August caused an increased demand for natural gas, but still allowed the industry to add to its stockpiles of natural gas in underground storage. At the end of August, natural gas in storage stood about 13 percent below last year's levels at this time, and about 6 percent below the average for the previous five years. With supplies tight for much of this year, the EIA projects that wellhead prices will average just under $5 per thousand cubic feet for all of 2003, up about $2 per thousand cubic feet from the 2002 average, which is a record price increase. Although the EIA projects a drop of about $1 per thousand cubic feet for 2004, the agency still expects residential natural gas prices to be about 10 to 15 percent higher on average for the upcoming heating season, compared to last winter. See the EIA "Short Term Energy Outlook".