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

June 09, 2004

Short-Term Energy Outlook Reflects Uncertain Oil Markets

Gasoline prices are finally on their way down, according to DOE's Energy Information Administration (EIA), and the declines are expected to continue as long as disruptions in the crude oil and gasoline markets are avoided. The EIA's latest "Short-Term Energy Outlook," released on June 8th, reflects the uncertainty in the oil and gasoline markets, noting that "it is difficult to know what will happen in the near term." Despite that uncertainty, the EIA projects an increase in oil supply that will cause crude oil prices to drop, averaging $36.20 per barrel in the third quarter of this year after averaging $40.30 per barrel in May. As a result, the retail price for regular gasoline is expected to average $1.82 for the second half of 2004 after averaging $1.91 this summer.

However, the EIA report places caveats on that projection, warning that "price spikes are still quite possible given the uncertainties surrounding Middle East instability, terrorism, Iraq, and the fact that, while more optimism for improvement is warranted, oil inventories worldwide are still low. In addition, currently low world oil surplus capacity levels provide an extremely limited cushion in the event of unexpected world oil market disruptions." See the EIA Short-Term Energy Outlook.