The Agricultural Retailers Association (ARA) is reporting that Guy Caruso, administrator of the Energy Information Administration (EIA), in a recent presentation at the Center for Strategic & International Studies predicted that consumers should expect to see gasoline prices at an average about $2.34 per gallon during peak driving times this summer.

A major factor in price and any potential regional supply disruptions will be the result of the refining industry transitioning to new fuel spec requirements. According to EIA, there are five fuel specification changes being implemented this year under Clean Air Act Mandates and other new federal requirements that could place stress on the fuel supply system. One of the major changes is the introduction of ultra-low sulfur diesel fuel and the removal of methyl tertiary butyl ether (MTBE). Refiners will be required to produce at least 80 percent of diesel fuel for highway use with no more than 15 parts per million sulfur content. As previously reported by ARA, changes to off road diesel fuel sulfur content will be phased out over the next several years. EIA predicts high prices for gas and oil for the next two years.

In a recent study released by the American Petroleum Institute (API), total drilling expenditures for the U.S. oil and natural gas industry reached a record $56.2 billion in 2004, compared to $36.9 billion spent in 2003. Natural gas exploration accounted for 65 percent of the total drilling expenditures in 2004, with oil exploration at 22 percent and 13 percent of dry holes. Ninety-nine percent of all offshore drilling and expenditures took place in the Gulf of Mexico. If the U.S. has another hurricane season in 2006 like this past year, consumers can expect serious supply problems. ARA and other agricultural organizations have advocated for Congress to authorize additional domestic exploration on non-environmentally sensitive federal lands and off the Outer Continental Shelf (OCS), where large supplies of natural gas are located. Efforts to address this issue in Congress failed in 2005, but the debate is expected to continue this year as industries and consumers are faced with larger energy bills. To view the latest EIA monthly report, go to http://www.eia.doe.gov.

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