The United States average retail gasoline prices will be lower this year and in 2020 compared with 2018, but will be higher than they are now because of impacts from mandated lower sulfur in maritime fuel.
The EIA forecasts regular retail gasoline prices will average $2.47 per gallon in 2019, which is a 10.5 percent increase from the $2.73 per gallon average for all of last year.
Average gasoline retail prices will then increase to $2.62 per gallon in 2020, it added. As of Thursday, the average price of a gallon of gasoline at service stations across the United States is $2.24 per gallon, according to the AAA driver’s club organization.
The changes will occur with gasoline prices following changes in the cost of Brent crude oil that the EIA projects will average $61 per barrel in 2019 and $65 per barrel in 2020, in both cases also lower than last year’s average of $71 per barrel.
Brent crude futures traded at $60.49 per barrel as of 7:20 a.m. EST Thursday.
“EIA expects crude oil prices to continue to increase in late 2019 and early 2020 because of an increase in refinery demand for light-sweet crude oil, which is the result of regulations from the International Maritime Organization that will limit the sulfur content in marine fuels used by ocean-going vessels,” the EIA said.
Those changes involve reducing permitted limits of sulfur from the previous 3.5 percent to 0.5 percent. This change, required by January 2020, will put pressure on prices in late 2019 and early 2020 as demand for lighter oil grades that are also preferred for gasoline production will increase.
“Because each barrel of crude oil holds 42 gallons, a $1-per-barrel change in the price of crude oil generally translates to about a 2.4-cent-per-gallon change in the price of petroleum products such as gasoline, all else being equal,” the EIA explained.
The EIA said that for 2019 there will be a supply increase from countries that are not part of the Organization of Petroleum Exporting Countries cartel that will more than compensate for any intentional declines by OPEC.
“EIA expects non-OPEC producers will increase oil supply by 2.4 million barrels per day in 2019 which will offset forecast supply declines from OPEC members, resulting in an average of 1.4 million barrel per day in total global supply growth in 2019,” it said.
For 2020, “the EIA expects oil production to increase by 1.7 million barrels per day because of production growth in the United States, Canada, Brazil, and Russia, while overall OPEC crude oil production is expected to remain flat,” it added.
As for demand, the EIA “forecasts global oil demand to grow by 1.5 million barrel per day in 2019 and in 2020.”
In both 2019 and 2020, it sees China as the leading contributor to global oil demand growth.