Gas prices are ticking back up and are set to continue higher, following drops in energy costs and very welcome lower fuel prices at the start of 2023. But now the switch to more expensive summer gasoline has begun, and that means higher costs will be steadily passed on to motorists. So how much will gas prices rise, and what can drivers do about it?
GasBuddy's head of petroleum analysis Patrick DeHaan notes that while oil prices dipped on projections of weaker economic growth, gas prices will continue to inch up due to staggered refinery maintenance and the higher cost of seasonal gasoline blends.
DeHaan predicts a bumpy transition to summer fuels that will create unpredictable hotspots and potential surprise jumps in prices during the spring. Continual weekly increases aren't guaranteed, but prices should follow an upward trend through the spring. At the current rate of increase, a $4 per gallon national average (opens in new tab) is possible by Memorial Day.
As gasoline prices increase, alternative fuels appeal more to vehicle fleet managers and consumers. Like gasoline, alternative fuel prices can fluctuate based on location, time of year, and political climate.
The Clean Cities Alternative Fuel Price Report provides regional alternative and conventional fuel prices for biodiesel, compressed natural gas, ethanol, hydrogen, propane, gasoline, and diesel. The Alternative Fuel Price Report is a snapshot in time of retail fuel prices. Alternative fuel fleets can obtain significantly lower fuel prices than those reported by entering into contracts directly with local fuel suppliers. See all price reports.
The White House has certainly been trying to move prices down. In addition to that update on the SPR release, it also pledged to refill the strategic reserves if prices fall, an attempt to incentivize domestic oil producers to pump more oil by giving them a guaranteed buyer.
This is a longstanding frustration for whoever is in the White House; while politicians are held responsible for gasoline prices, they have very limited tools for actually affecting those prices, and the tools they do have don't work super well.
So why is U.S. production lower than it might be? There's a tug-of-war going on, between incentives to drill more oil and incentives to drill less. On the "more oil" side you have the profit a company can make on each new barrel it drills. On the "less oil" side, you have supply chain problems, labor shortages, investors who are enjoying high oil prices, and fears of a global recession, as well as the potential impact of long-term climate policies.
Some governments around the world simply own oil production within their borders outright and set fuel prices for their citizens regardless of market prices. Think of Venezuela, or Iran. The U.S. economy is, intentionally, set up very differently.
Additionally, shop around for the best price. Depending on where you live, there can be big price swings between gas stations. And even if the difference in price per gallon may only be a few pennies, it can still add up to hundreds of dollars per year. Even prices from one state to another can vary significantly.
The US Retail Gas Price is the average price that retail consumers pay per gallon, for all grades and formulations. Retail gas prices are important to view in regards to how the energy industry is performing. Additionally, retail gas prices can give a good overview of how much discretionary income consumers might have to spend.
Not surprisingly, soaring gas prices are having a very real impact on household budgets: A typical family may incur additional costs of $2,000 this year simply due to the higher costs, according to one Wall Street estimate. On March 11, gas prices again reached a new peak, an average of $4.33 a gallon, according to AAA. Prior to this week, the previous record was $4.10 a gallon in 2008, just before the financial crisis.
Until that happens, fuel prices remain a major topic of discussion, with families budgeting for higher gas costs and cutting spending in other areas. Some Americans are already driving less due to the higher prices. One in three adults say they reduced their car usage last month, with most blaming gas-pump sticker shock, according to Morning Consult.
So how did we get here? Today's stratospheric gas prices have their root in the COVID-19 pandemic, with Russia's war on Ukraine pushing prices higher in recent weeks, said Patrick De Haan, GasBuddy's head of petroleum analysis.
Against that backdrop of steadily rising prices, Russia's war in Ukraine has caused a rapid 20%-plus spike in oil and gas prices in mere weeks. Benchmark U.S. crude oil rose $3.31 to $109.33 a barrel March 11, while Brent crude rose $3.34 to $112.67 a barrel.
The U.S. imports less than 10% of its oil and gas from Russia. So why are prices rising so much in the U.S. if the nation doesn't depend on Russia for fuel? The surge in gas prices is due to the larger global oil market, De Haan said.
"When the U.S. issues sanctions, that has wide ramifications on the ability of Russia to export oil," he said. "We don't import a lot, but somebody else does and we are making it difficult for Russian oil to flow to the global market, and prices are reacting to that."
Republican lawmakers are blaming President Joe Biden's policies for higher gas prices, pointing to the administration's decision last year to cancel the Keystone XL pipeline, for instance. They also blame Mr. Biden's executive order to pause oil and gas drilling on federal land in January 2021. (A federal judge in Louisiana blocked that order in June.)
It's also important to remember that when adjusted for inflation, today's fuel prices are still below their peak in 2008, he noted. In today's dollars, the price was closer to $5.25 a gallon. De Haan believes most consumers won't cut back on driving until prices reach that $5 per gallon mark.
Expect gas prices to remain elevated for weeks if not months, experts say. Overall inflation will likely get worse in March and April before improving, Bill Adams, chief economist for Comerica Bank, said in a report.
"With gasoline prices surging and the war in Ukraine dominating the headlines, it was little surprise that the University of Michigan consumer confidence index fell to an 11-year low in early March," Capital Economics said in a report.
Americans have never seen gasoline prices this high, nor have we seen the pace of increases so fast and furious. That combination makes this situation all the more remarkable and intense, with crippling sanctions on Russia curbing their flow of oil, leading to the massive spike in the price of all fuels: gasoline, diesel, jet fuel and more," Patrick De Haan, head of petroleum analysis at GasBuddy, said in a statement Monday.
Some gas locations reported prices about $2 over the state average. Stations in Los Angeles and San Francisco sell regular gas for more than $6 per gallon, some reaching nearly $7. In the city of Gorda, about 140 miles south of San Francisco on the coast, one station charged $7.59, KSBW reported.
The California Public Utilities Commission (CPUC) will hold an En Banc to discuss recent high natural gas prices this winter, examine possible drivers and impacts on electric markets, and explore potential measures to mitigate the impact of natural gas and electric market volatility.
WHAT: This En Banc will examine the causes and impacts of recent high natural gas prices that are impacting customer bills this winter. The CPUC is hosting this En Banc in coordination with the California Energy Commission and the California Independent System Operator. The discussion will address: 1) How natural gas prices work in the California context; 2) Understanding interstate gas pipeline operations and impacts of outages; 3) Impacts on the electric market from high natural gas prices; and 4) Strategies to mitigate high natural gas and electric market prices. There will be an opportunity for public comment at the En Banc. The most updated information related to the En Banc, including an agenda, will be available at www.cpuc.ca.gov/events-and-meetings/en-banc-2023-02-07.
The time and money it takes to produce a barrel of oil also affects prices at the pump. Large domestic offshore drilling projects that could bring millions of barrels a day to the market takes time and effort that affects the ultimate price per barrel, making it more affordable to look to other nations who are able to produce oil more quickly and affordably.
Gas prices may remain unpredictable as the war in Ukraine continues. For consumers hoping to save at the pump, Kloza said a change could be steering away from using premium gas and if possible, driving a smaller car that will use less gas.
"Less expensive oil and fewer people fueling usually combine to lower pump prices," AAA spokesperson Andrew Gross said in a statement. "However, there is some upward pricing pressure at the moment due to the switch to summer blend gasoline, which may add about 5 to 10 cents per gallon. But if demand and oil costs remain low, this recent price bounce may fade."
"Crude prices decreased yesterday due to weaker domestic oil demand expectations for 2023 after the Chair of the U.S. Federal Reserve indicated that additional interest rate increases are likely," AAA said in its report. "The market is concerned that rising interest rates could tip the U.S. economy into a recession, which would lower oil demand amid reduced economic activity. "
The highest average gas prices are predicted to come in June at an estimated peak of up to $4.19 per gallon, GasBuddy said. Most U.S. cities are expected to see prices peak at around $4 per gallon, based on the analysis. 041b061a72