Released on January 30, 2008
(Next Release on February 6, 2008)

The Big Event
On Sunday, February 3, millions of Americans will be watching Super Bowl XLII, to see if the New England Patriots or the New York Giants will be crowned champions of the most recent football season. However, two days before the “Big Game”, another event will take place that could have a larger impact on the daily lives of Americans. On February 1, the Organization of the Petroleum Exporting Countries (OPEC) will meet to discuss whether any change in production targets is warranted. Their decision could impact the price of gasoline this spring.

Twice in recent months, crude oil prices have reached or at least flirted with the $100 per barrel mark, before quickly falling back to $90 per barrel or less (see chart below). When prices were close to $100 per barrel, many analysts expected that OPEC might consider increasing production targets when they meet on February 1. However, with the recent softening of crude oil prices, this outcome is less likely, and some analysts are even raising the prospect that OPEC might reduce its production targets later in the year. While prices have declined from their peak, crude oil prices do remain relatively high, based on historical levels, and EIA expects monthly average oil prices to remain above $85 per barrel over the first half of 2008, even if OPEC keeps production (if not targets) near current levels.

Of course, there is a significant amount of uncertainty regarding the near-term forecast, not just for prices, but also demand. Concerns about a possible U.S. recession, and its potential impact on the global economy have led many market participants to expect less oil demand than previously forecasted. As EIA develops its next short-term forecast (to be released on February 12), expectations of supply and demand for this year and next will be looked at closely. OPEC’s upcoming decisions could have a large impact not only on EIA’s crude oil price expectations for the coming year, but also for gasoline prices this spring.

Residential Heating Oil Prices Dip Again
Residential heating oil prices saw another week of decreases for the period ending January 28, 2008. The average residential heating oil price dropped by 2.1 cents last week to reach 330.9 cents per gallon, which was an increase of 97.6 cents from this time last year. Wholesale heating oil prices increased by 1.3 cents, reaching 259.7 cents per gallon, which was a gain of 102.5 cents compared to the same period last year.

The average residential propane price decreased by a mere 0.1 cent per gallon to 256.2 cents per gallon. This was an increase of 57.0 cents compared to the 199.2 cents per gallon average for this same time last year. Wholesale propane prices increased by 1.9 cents per gallon, from 152.7 to 154.6 cents per gallon. This was an increase of 60.2 cents from the January 22, 2007 price of 94.4 cents per gallon.

Retail Gasoline Price Drops Below $3
The U.S. average retail price for regular gasoline fell below $3.00 a gallon for the first time since December 24, 2007, to 297.7 cents per gallon as of January 28, 2008, 4 cents lower than last week but 81.2 cents above a year ago. Prices were down throughout the country with the East Coast falling 3.7 cents to 302.5 cents per gallon. The Midwest lost 3.6 cents to 292.2 cents per gallon, 84.1 cents per gallon more than last year. The lowest regional price occurred in the Gulf Coast where a decrease of 2.9 cents brought the price to 287.5 cents per gallon. The Rocky Mountain price slumped 1.4 cents to settle at 291.4 cents per gallon. The West Coast at 308.6 cents per gallon remained the highest regional price while registering the largest regional decrease of 6.9 cents. The average price for regular grade in California dropped to 314.8 cents per gallon, 7.8 cents less than last week.

The retail diesel fuel price declined 1.1 cents to 325.9 cents per gallon, 84.6 cents higher than last year. All regional prices were lower except in the Rocky Mountains where a 0.7 cent increase brought the price to 323.6 cents per gallon. The East Coast fell by 1.6 cents to 332.7 cents per gallon, again the highest regional price. The lowest regional price of 321.8 cents per gallon occurred in both the Midwest and the Gulf Coast regions with declines of 1 cent and 0.4 cent, respectively. The West Coast slumped 2.6 cents to settle at 330.1 cents per gallon. California prices lost 1.4 cents to 334.6 cents per gallon.

Propane Inventories Continue Strong Seasonal Draw
Propane inventories continued to post strong seasonal declines last week that showed about a 3.1-million-barrel draw, with inventories settling at an estimated 42.4 million barrels as of January 25, 2008. Midwest inventories led the way with the largest weekly decline that measured 1.6 million barrels, followed by a 1.3 million barrel decline in the Gulf Coast region. During this same time, inventories in the East Coast fell by 0.1 million barrels while the combined Rocky Mountain/West Coast region remained relatively unchanged. Propylene non-fuel use inventories gained 0.1 million barrels last week to account for a larger 6.3 percent share of total propane/propylene inventories, up from the prior week’s 5.6 percent share.

Registration Now Open for EIA Energy Conference on April 7-8
Registration is now open for an energy conference that EIA is holding in Washington, DC on April 7-8. To see the exciting agenda planned and to register for the free conference, please go to: http://www.eia.doe.gov/eia_conference_2008.html

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