As Prepared for Delivery
Press briefing teleconference on gasoline prices
John Felmy, API chief economist
Wednesday, May 23, 2012
Good afternoon everyone. Thanks for calling in.
Six months ago, experts said gasoline prices could hit $5.00 a gallon this summer. They’ve stopped making those predictions.
Gasoline prices have now been declining for seven weeks. Yesterday they averaged $3.68 per gallon across the nation. That’s 26 cents a gallon lower than on April 5th. The decline follows a significant fall in world crude oil prices from $110 in February to $92 yesterday.
A number of factors help account for the fall in crude oil and gasoline prices. They include weakness in the global economy, European countries sliding back into recession, and slow growth in the United States. All have hurt demand.
Turmoil in the Middle East has subsided some, lessening market volatility.
U.S. demand for gasoline is up only slightly over a year ago. However, overall U.S. petroleum demand is down. America’s refineries are producing fuel at record levels, offsetting some imports and providing more fuel for export.
We now import about half the oil we consume, down from about two-thirds in 2005.
Where will prices go this summer driving season? Because API is a trade association for the industry, we don’t project prices.
However, the U.S. Energy Information Administration’s latest driving season forecast projects that gasoline prices will average about $3.79 per gallon this summer.
Declining prices help consumers and the economy. But $3.79 a gallon is still a significant cost for most families, many of whom can recall 2008 when gasoline prices were below $2.00 a gallon.
For the average family, $3.79 a gallon translates to an annual fuel expenditure of about $3,000.
To continue to help consumers will require increasing oil supplies and using gasoline and other oil products more efficiently.
There are plenty of opportunities to produce more oil. We’re seeing them in the United States in North Dakota and Texas and in many other parts of the country.
We’re also seeing them outside the United States in countries like Brazil and Canada.
If U.S. policymakers are serious about helping consumers, they’ll help expand opportunities for more oil and gas development. They’re not getting that job done now.
Energy policy should encourage more development on public lands and federally controlled waters, ensure regulations are reasonable, and require faster project approvals. With these steps, we could begin to increase oil production almost immediately and encourage the investments that could provide more significant additions to supply within a few years.
Besides increasing our oil supplies, more development also would create large numbers of new jobs and increase revenue to our government.
Biofuels can substitute for oil for some purposes, and ethanol is now widely blended in gasoline. But we will continue to demand large amounts of oil even with growth in renewable energy, according to the U.S. energy department.
Consumers can help trim demand – and put downward pressure on prices – by using gasoline and other fuels more efficiently.
One way to reduce demand is to consolidate trips. By planning errands better and carpooling when possible, significant reductions in fuel use are possible.
Consumers also can save gasoline by ensuring vehicle engines are tuned and tires are properly inflated. Both can increase miles per gallon.
Also, those purchasing new vehicles might consider more fuel efficient models. Many conventional vehicles can now go 40 miles on a gallon of gas, and consumers can choose from an array of hybrid and electric vehicles and some powered by natural gas.
Finally, motorists can conserve by keeping speeds down. Lower speeds increase mileage and enhance safety.
The good news is that gasoline prices have recently headed in a positive direction for consumers, and managing demand could help that trend continue. But supply also must be addressed.
One thing is certain: Demand for oil will increase, and more supply will be vitally important to keeping the U.S. economy and economies around the world growing.
Thank you. I’d be happy to answer your questions.
There is no industry, and no state, more important in this dialogue.
North Dakota is the frontier of this country’s future once again. You are this century’s new pioneers, taming the earth, moving forward, and conquering the unknown. The men and women of the oil and natural gas industry have answered the challenge and changed America’s future.
I look forward to working with all of you to make North Dakota’s vision a national reality.