Short Term Energy Outlook and more...

EIA released its monthly update of Short Term Energy Outlook:

The projected average West Texas Intermediate (WTI) crude oil price for the first quarter of 2005 has been revised upward to about $48.70 per barrel, approximately $13 per barrel higher than in the first quarter of 2004 and $2 per barrel above the first quarter 2005 projection in the previous Outlook. EIA projects that WTI prices are likely to remain near the high-to-mid-$40’s (or higher) per barrel range throughout 2005-2006. It is emphasized that oil prices are likely to be sensitive to any incremental supply tightness that appears during periods of peak demand worldwide. Imbalances (real or perceived) in light product markets could cause light crude oil prices (such as WTI) to increase to well above $50 per barrel, as has recently occurred.
...Pump prices for regular gasoline are expected to average about $2.10 per gallon during the 2005 driving season (April through September), up 20 cents from the same period in 2004. Sustained domestic growth in gasoline demand, both seasonal and year-over-year, is expected to increase average monthly prices to about $2.15 per gallon by spring.

Honestly, I would not read much in to this report. Just keep in mind that the much of the increase in crude prices we are seeing now, and will probably see at least until the 16th of March, will show up in the higher gasoline prices with a slight lag. In spite of the fact that the inventories of gasoline in the US are at a robust level, expect a lot of hue and cry about using the Strategic Petroleum Reserve (SPR) and the perrenial favourite CAFE standards!
I hope that the administration will play cool to the demands about using SPR just like it did so last year. The battle over CAFE is going to heat up, or at least I expect so. Remember that the congress must act if the fuel economy standards for passenger cars are to be raised. They may want to wait for NHTSA to plough through the 66,000 comments on the light-truck standards. NHTSA should release its ANPRM in December 2005 for rulemaking on light trucks standards in April 2006. Overall, it is unlikely that any credible action will be taken in 2005 to raise the CAFE standards.
So, it will be interesting to see if consumers start to show some interest in fuel economy for a change. Some of the trends to watch for among others:
* Sales of hybrid vehicles, particularly hybrid Accord, Lexus RX400h, and the Mercury Mariner hybrid if it is released.
* Sales of crossover vehicles as opposed to the SUVs
* % increase in road travel around Memorial day
Overall, it is going to be an uneasy year on the fuel consumption aspect. Every year of delay in taking some action on trying to reduce the rate of growth of demand will come back to haunt us if things go awry. We are already in an unenviable position in terms of worldwide, and specially US automobile fuel consumption, and have time and again found this to be the stickiest of the issue in the energy domain.