Gas prices will flirt at $ 4 per gallon by Memorial Day, GasBuddy predicts

“The economy is hot.”

GasBuddy bases its forecast on several main themes, including demand that continues to recover from Covid much faster than supply.

“The economy is hot. Demand has returned roaring. But supply is still on the rise after being sharply reduced in 2020,” said De Haan.

OPEC and its allies adopted unparalleled production cuts in the spring of 2020 after oil prices fell below zero for the first time ever. US oil companies also reduced production.

Despite high prices, neither OPEC + nor US oil producers have returned to pre-Covid production.

Closure of refineries is also a problem

The other important factor is that central refineries have been sidelined in recent years.

Refinery capacity fell to a low level of six years in 2021, according to the EIA. De Haan, the GasBuddy analyst, said that the decline in more refineries has contributed to higher price prospects.

“There is less respite as a result of these refinery closures,” he said.

“Everything can change”

The good news is that GasBuddy does not expect the spring rise in gas prices to last.

The forecast indicates that gas prices will remain high at 3.78 dollars per gallon in June and 3.57 dollars in July, but then fall sharply when demand cools. By December, GasBuddy expects gas prices to average $ 3.01 per gallon nationally, which is below current levels.

Of course, no one can say with certainty where gas prices will go next. Covid has made it very difficult to accurately predict much about today’s economy.

Although GasBuddy’s previous forecasts were reasonably close to where prices ended, the company did not see the increase in 2021 coming.

De Haan admits that there is a lot of uncertainty today, especially on the Covid front.

“Everything can change,” he said. “Tomorrow there may be a ridiculous variation and prices may plummet.”

Biden’s historical intervention

Nevertheless, the $ 4-a-gallon gas range will only intensify the political debate over high gas prices.

Republicans have tried to blame President Joe Biden for the energy sticker, pointing to his ambitious climate agenda.

Rumors of an intervention drove oil prices around 10% lower before the SPR announcement, although experts doubted that the move would provide lasting relief for energy prices. And then Omicron appeared and sent oil prices for a short while longer, before picking up again.

Emilie Simons, a White House spokeswoman, pointed out that 21 states have average gas prices below $ 3.15 per gallon, which puts them below the 20-year real average.

“While current price levels are not outstanding,” Simons told CNN in an email, “the president believes they are too high, especially given that we are emerging from a pandemic like once in a century.”

Keystone Pipeline Debates

Biden’s critics often point to his Day One decision to withdraw the Keystone XL Pipeline license.

But this pipeline was not even planned to start shipping oil until 2023. Even the American Petroleum Institute has admitted that Keystone is not the main factor behind today’s high prices.

“Americans who think it has been tricked into believing that a pipeline somehow produces oil. They do not. They only carry oil,” De Haan said.

In any case, about half of the oil pipeline space in the United States is unused after years of rapid expansion.

The US pipeline capacity is around 50%, compared to a range of 60% to 70% before Covid, according to Wood Mackenzie.

“We would have seen an increase in gas prices,” he said, “no matter who was in the oval office.”