August 9, 2011 Release                                        

Highlights

• EIA expects the U.S. average refiner acquisition cost of crude oil will rise from $100 per barrel in 2011 to $107 per barrel in 2012 as global spare production capacity and inventories continue to decline.  This forecast assumes that U.S. real gross domestic product (GDP) grows by 2.4 percent this year and 2.6 percent next year, while world oil-consumption-weighted real GDP grows by 3.4 and 4.1 percent in 2011 and 2012, respectively.  These assumptions do not fully reflect recent economic and financial developments that point towards a weaker economic outlook and also contributed to a sharp drop in world crude oil prices during the first week of August.  There is a significant downside risk for oil prices if economic and financial market concerns become more widespread or take hold.

• The regular-grade gasoline monthly average retail price fell from $3.91 per gallon in May to $3.65 per gallon in July, reflecting the decline in crude oil prices from their April peak and a recovery from unexpected refinery outages.  Projected regular-grade gasoline prices average $3.58 per gallon and $3.44 per gallon in the third and fourth quarters of 2011, respectively, about 6 cents per gallon below last month’s Outlook.  

• Extremely hot weather settled on much of the Nation last month, with U.S. population-weighted cooling degree-days 27 percent higher than the 30-year normal and 8 percent higher than last year, which contributed to an increase in natural gas consumption for electricity generation compared with July 2010.  Nevertheless, the estimated 246 billion cubic feet (Bcf) increase in natural gas working inventories during July 2011 was 21 Bcf higher than during the same month last year.  Natural gas working inventories ended July 2011 at 2.8 trillion cubic feet (Tcf), about 7 percent, or 194 Bcf, below the 2010 end-of-July level.  EIA expects that working natural gas inventories will build strongly, approaching last year’s high levels by the end of this year’s inventory build season.  The projected Henry Hub natural gas spot price averages $4.24 per million British thermal units (MMBtu) in 2011, $0.15 per MMBtu lower than the 2010 average.  EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.41 per MMBtu.

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