NATIONAL — The United States Energy Information Administration (EIA) released a report forecasting crude oil prices to be higher than $100 per barrel over the coming months. The energy industry saw a sharp increase in Brent and West Texas Intermediate (WTI) crude oil prices after the invasion of Russian forces into Ukraine. EIA explained that this rise in prices is a reflection of “increased geopolitical risk and uncertainty regarding how announced and potential future sanctions may affect global energy markets.”
EIA continued, “In our March 2022 Short-Term Energy Outlook (STEO) … we increased our forecast price of international benchmark Brent crude oil to $116 per barrel (b) for the second quarter of 2022. We expect gasoline prices to average about $4.10 per gallon (gal) during the second quarter of 2022 and then decline through the rest of the year.”
EIA also forecasted that the WTI price would average $113/b in March and $112/b in the second quarter of 2022. The heightened potential for Russia to further invade Ukraine and for the U.S. to limit energy imports from Russia, as well as changes in Russian petroleum production and global crude oil demand, can lead to some uncertainty in the forecast, EIA explained.
“Our higher forecast Brent crude oil price also increased our forecast for the retail price of gasoline,” EIA reported. “We expect gasoline in the United States to average $4/gal this month and to continue rising to a forecast high of $4.12/gal in May before gradually falling through the rest of the year. We forecast the U.S. regular retail gasoline price will average $3.79/gal in 2022 and $3.33/gal in 2023. If realized, the average 2022 retail gasoline price would be the highest average price since 2014, adjusting for inflation.
Of note is that EIA’s STEO update was completed prior to the U.S. banning imports of oil, liquefied natural gas and coal from Russia; the United Kingdom phasing out Russian oil imports throughout 2022; and the European Union planning to reduce fossil fuel imports from Russia. It therefore does not include how these announcements may affect the energy markets.
“In addition, several international oil companies announced plans to stop their operations in Russia and end partnerships with Russian firms, which could limit future crude oil production in Russia,” EIA further clarified. “The new announcements could put additional upward pressure on crude oil prices; however, any international response and the impacts those responses may have on global balances are uncertain.”
