Strong global demand for oil will keep prices high despite a downturn in demand in the U.S., two prominent forecasters warned.
The U.S. Energy Department and the International Energy Agency said Tuesday there is unlikely to be much relief from high oil prices because of brisk demand in China and other emerging markets.
In Washington, the Energy Department's Energy Information Administration raised its average oil price estimate for this year from $86.46 to $94.11 a barrel, and boosted its average U.S. gasoline price estimate to $3.21 from $3.07 a gallon (3.8 liters). Gas prices will likely peak this spring near $3.50 a gallon, the EIA said, raising that forecast by a dime.
Last year, oil averaged $72.32 a barrel, and U.S. gasoline averaged $2.88 a gallon. On Tuesday, oil set a record of $109.72 a barrel on the New York Mercantile Exchange, and gas rose to a record of $3.2272 a gallon, according to AAA and the Oil Price Information Service.
At the same time, the EIA said high prices and a weakening economy will depress demand for oil and gasoline this year. U.S. consumption of oil and petroleum products is expected to rise this year by only 40,000 barrels a day, a 100,000 barrel-a-day cut from last month's forecast. Once projected increases in ethanol use are removed from the equation, U.S. petroleum demand will actually fall this year by 90,000 barrels a day, EIA said.
Gasoline consumption, meanwhile, will grow by only 0.3 percent this year, down from last month's estimate of 0.8 percent growth.
But overseas demand for oil will remain strong, the EIA said, growing by 1.3 million barrels a day, a cut of about 100,000 barrels a day from last month's forecast.
The Paris-based IEA also revised downward its predictions for 2008 crude consumption in the U.S., Europe and other developed markets, forecasting a drop of 190,000 barrels a day, but said demand from China and other countries outside the Organization for Economic Cooperation and Development would likely grow by 120,000 barrels a day.
The IEA is the energy watchdog for the Organization for Economic Cooperation and Development, a grouping of the world's most industrialized nations.