EIA Sees No Long-Term Drop in Energy Prices

January 10, 2007

Despite recent sags in the price of oil, gasoline, and natural gas, DOE's Energy Information Administration (EIA) is forecasting no long-term decrease in energy prices. The EIA's latest Short-Term Energy Outlook, released on January 9th, notes that oil prices hovered around $60 per barrel during the fourth quarter of 2006, but still projects average prices above $64 per barrel for this year and next. With global oil demand expected to rise by 1.5 million barrels per day in 2007, demand will keep pressure on oil prices, but the EIA still projects an increase in spare production capacity among the members of the Organization of Petroleum Exporting Countries (OPEC). The EIA also warns of potential short-term volatility in oil prices.

Following the trends in oil prices, the average price for regular unleaded gasoline is currently near $2.30 per gallon, but with growing demand, EIA expects prices to steadily increase over the next few months, then hover around $2.40 to $2.70 per gallon. For natural gas, persistent warm weather in much of the United States has reduced the demand for the fuel, preventing a rise in prices. The spot price for natural gas averaged $6.97 per thousand cubic feet (mcf) in December, but the EIA expects natural gas prices to average $7.06 per mcf in 2007 and $7.72 per mcf in 2008. See the EIA's Short-Term Energy Outlook.

The EIA expects imports of liquefied natural gas (LNG) to play an increasing role in the next two years, after slumping in 2005 and 2006 due to market constraints. LNG imports in 2007 should reach 770 billion cubic feet (bcf), well above the high-water mark of 652 bcf set in 2004, and should further increase to 1,080 bcf in 2008, according to EIA. See the EIA's special report on LNG imports (PDF 251 KB). Download Adobe Reader.