CHICAGO -- Gasoline prices this summer are on track to hit a multiyear high, according to fuel-price analysts.
“This summer, in terms of average gas prices, will likely be the highest since 2014,” Patrick DeHaan, petroleum analyst for Boston-based GasBuddy, told the Wall Street Journal. “There’s been very little question about that.”
The Oil Price Information Service (OPIS) is projecting a summer retail average of $2.79 per gallon, hitting the highest mark for that season since 2014. In some cities, prices could top $3 per gallon, it said. As of April 9, five states had retail averages already over $3, including California ($3.51), Hawaii ($3.47), Alaska ($3.12), Oregon ($3.05) and Nevada ($3.05), according to GasBuddy.
Higher crude prices are heating up the price projections. U.S. oil futures have grown by about 40% since the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing nations agreed two years ago to cut their production, the Wall Street Journal reported. Gasoline futures are 8.6% higher in 2018 thus far. “What we’re seeing now at the pump is reflective of OPEC’s decision in 2016 to cut back on oil production,” DeHaan said.
U.S. shale oil producers have not been able to fully offset the OPEC cuts, despite hitting record-high outputs in 2018. U.S. gasoline inventories, meanwhile, have declined for five straight weeks, according to March 30 figures from the Energy Information Administration. U.S. exports of gasoline have also hit records recently.
“That’s a big difference from a decade ago, or even a few years ago,” Tom Kloza, global head of energy analysis for OPIS, Gaithersburg, Md., told the Journal. “We’re kind of refiners to the entire Western Hemisphere right now.”
The increase in gasoline prices also has seasonal factors. Refiners are transitioning to more expensive spring and summer blends, and demand tends to rise heading into the peak driving season.
DeHaan of GasBuddy believes that the higher gasoline prices could crimp demand. “The rise of the use of the word ‘staycation’ is probably going to happen this summer,” he said. “You may start to see some people that are turned off to higher prices.”
But other analysts believe the projected summer 2018 average relative to 2014’s $3.70-per-gallon level, and the overall strong condition of the economy, will diffuse any decline in consumption.
“Employment rates are very favorable; incomes are rising,” Robert Campbell, an analyst for Energy Aspects, told the newspaper, pointint out that gasoline prices “are not at the point where we think it starts to push demand over.”