BOSTON -- After the national retail price average for gasoline hit a four-year high in 2018, it should drop slightly in 2019, but not before flirting with $3 per gallon in several markets, GasBuddy announced in its 2019 Fuel Price Outlook.
GasBuddy is predicting a $2.70-per-gallon national average for gasoline in 2019, compared to $2.73 for full-year 2018. This 3-cent-per-gallon (CPG) decline would end two years of increases in the national retail average, which hit its highest point in four years in 2018. The national average price in 2018 was 34 CPG higher than that of 2017, despite an end-of-the-year decline that brought prices from $2.91 to $2.28 per gallon between Oct. 10 and just before New Year’s Eve, according to GasBuddy.
The national average is projected to start around $2.35 per gallon for January, before climbing to a $2.97 average in May, and gradually settling to $2.56 for December. For that May high point, more than 90% of the largest metro areas in the U.S. could flirt with averages around $3 per gallon, including Atlanta, Boston, Chicago, Los Angeles, Miami, New York City, Philadelphia, Phoenix, San Francisco, Seattle and Washington, D.C., according to GasBuddy.
With the projected national average at $2.70 per gallon in 2019, Americans would pay $2.5 billion less for gasoline compared to 2018. For the average U.S. household, this would translate to a $25 drop from 2018, or $1,991 for the full year.
For diesel, GasBuddy forecasts the 2019 national retail average at $3.19 per gallon, hitting a low in July of $3.07 and a high in December of $3.36. Future price increases are likely in store as international maritime regulations loom that require ships to switch to low-sulfur fuel by 2020—with diesel as a popular substitute.
In the report, GasBuddy’s Patrick DeHaan, head of petroleum analysis, and Dan McTeague, senior petroleum analyst, describe 2019 as “perhaps the most challenging year in recent memory to pin down monthly gas prices with any reasonable accuracy.” They point to two scenarios that could put a bullish or bearish spin on the forecast.
First, the bullish scenario: If members and nonmembers of Organization of the Petroleum Exporting Countries (OPEC) stick to their agreed-to 1.2-million-barrel-per-day production cut, this could eat into excess supply and put upward pressure on oil and gas prices. Also, the waivers granted by the U.S. Department of State to some countries to import Iranian crude are due to end in June; assuming they are not renewed, this would add supply and price pressure. And if the United States and China resolve their trade differences, this should relieve a risk premium on global demand growth, which would also pressure prices. And, the United States’ strong economy could continue to support a higher price environment.
On the other hand, a lower price forecast could be in the cards if the equities and energy futures markets continue to remain pessimistic about the chances of a global recession. Also, a continuation of trade tensions between the U.S. and China and the lack of a deal on the tariff tit for tat would also weigh on energy prices. China’s economic growth has lagged recently, which would affect the global demand outlook. If oil prices do begin to increase, GasBuddy analysts expect the three largest producers—the United States, Russia and Saudi Arabia—to raise their output. Finally, U.S. gasoline demand slackened toward the end of 2018, with signals that the country has hit a peak, even for the summer driving months—this also would weigh on prices.
Which pricing scenario wins out in 2019 will be determined in the months ahead and the political environment.
“While the national average failed to hit $3 last year, we have an even stronger possibility of seeing that ugly possibility, which would push prices in some places from $1.99 today to over $3 this spring—which would be an impressive and shocking turnaround in just a few months,” said DeHaan of Boston-based GasBuddy. “One caveat, however, that may have motorists unexpectedly spending less is what happens in the White House. Should all the darkest realities come to fruition, it could lead to [a] slowdown in the economy and take gas prices right along with it.”