Gasoline prices: The national average could rise to nearly $4 by Memorial Day 2022, GasBuddy predicts

The pain at the pump will get worse before it gets better.

That’s according to a new GasBuddy forecast that predicts the national average will grow to $3.41 a gallon by 2022, up from $3.02 a gallon this year.

That would reverse some of the recent relief US drivers have received as gas prices have slowly receded from seven-year highs.

GasBuddy’s forecast, shared exclusively with CNN, predicts pump prices will peak nationally at a monthly average of $3.79 in May, before eventually receding below current levels. by the end of 2022.

Patrick De Haan, head of petroleum analysis at GasBuddy, an app that tracks fuel prices, demand and outages, said: worst case scenario, can exceed $4 a gallon.

That would add to inflationary pressures hitting American families grappling with the biggest price spike in nearly 40 years. And it would add to the political headache of the White House.

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According to AAA, the national average at the pump point dropped to $3.29 per gallon on Monday. This is down 13 cents from a peak of $3.42 on Nov.

Calls for gas prices to rise further in the coming months contrasted with forecasts from the government and some, though not all, forecasts on Wall Street.

The U.S. Energy Information Administration said on December 7, the national average will likely drop to $3.01 a gallon in January and drop to $2.88 for 2022. Citigroup also predicts a “radical fall” in energy prices, including a potential bear market for oil next year.

‘The economy is hot.’

GasBuddy is basing its forecasts on several key themes, including demand continuing to recover from COVID much faster than supply.

“The economy is heating up. Demand has picked up again. But supply is still catching up after being heavily cut in 2020,” De Haan said.

OPEC and its allies enacted unprecedented production cuts in the spring of 2020 after oil prices fell below zero for the first time. American oil companies also cut production.

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

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Refinery shutdown is also a problem

The other major factor is that key refineries have been shut down in recent years.

Low prices during the COVID-19 outbreak have forced the closure of several refineries, which supply the gasoline, jet fuel and diesel the economy depends on.

Another Louisiana refinery was damaged by Hurricane Ida in August, prompting Phillips 66 to convert the facility into a replacement oil terminal.

And then last week, one of America’s largest refineries, the ExxonMobil plant in Baytown, Texas, was shaken. by an explosion that injured at least four workers.

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Tom Kloza, chief oil analyst with the Oil Price Information Service, previously told CNN that the Baytown refinery accident could affect already constrained gasoline supplies. Kloza said he wouldn’t be surprised to see average prices rise to $4 a gallon in much of the country this spring and summer.

Refinery capacity falls to a six-year low in 2021, according to the EIA. De Haan, an analyst with GasBuddy, said the collapse of many refineries has contributed to the higher price outlook.

“There is less and less room to breathe as refineries shut down,” he said.

‘Everything is subject to change’

The good news is that GasBuddy doesn’t anticipate the spring gas price hike to last.

The forecast suggests that gas prices will continue to rise at $3.78/gallon in June and $3.57 in July but then drop sharply as demand declines. By December, GasBuddy expects gas prices to average $3.01 a gallon nationally, well below current levels.

Of course, no one can say for sure where gas prices will go in the near future. COVID has made it difficult to accurately forecast many things about today’s economy.

While GasBuddy’s previous forecasts were close to the closing price, the company doesn’t see a spike in 2021.

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

“Anything can change,” he said. “Tomorrow there could be an absurd variation and the price could plummet.”

Biden’s historic intervention

However, the specter of $4 a gallon gas will only intensify the political debate around high gas prices.

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

Biden entered the fray in November when he formed a coalition of energy-consuming nations to intervene in the oil market. The White House announced the largest-ever release of barrels from the Strategic Petroleum Reserve and convinced China, India, South Korea and other countries to join.

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Rumors of an intervention sent oil prices down about 10% ahead of the announcement of the SPR, although experts doubt the move will help lower energy prices in the long run. And then Omicron emerged, sending oil prices plummeting for a short time, before they recovered somewhat.

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

“While current prices are not unprecedented,” Simons told CNN in an email, “The president believes they are too high, especially as we are emerging from a century-long pandemic.” .”

The Keystone Pipeline Debate

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

But the pipeline isn’t even scheduled to begin shipping oil until 2023. Even the American Petroleum Institute admits Keystone isn’t a major factor behind today’s high prices.

“The Americans who believe that are fooled into thinking that an oil pipeline is somehow generating oil. They don’t. They’re merely carrying oil,” De Haan said.

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

According to Wood Mackenzie, US pipeline capacity is at 50%, compared with about 60% to 70% before COVID.

De Haan noted that although the Biden administration has issued a moratorium on drilling on federal land, the ban has been blocked in court and the Interior Department has issued multiple permits recently.

“We’ve seen gas prices skyrocket,” he said, “no matter who’s in the Oval Office.”

The-CNN-Wire™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. Copyright Registered. Gasoline prices: The national average could rise to nearly $4 by Memorial Day 2022, GasBuddy predicts

Dais Johnston

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