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Will Gas Prices Hit $5 Again Soon? Analyst Says ‘Extremely Long Shot’ - Forbes

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Gas prices likely won’t return to their all-time peak of over $5 per gallon and might not even hit $4 this summer, despite rising demand and low gasoline inventories, according to one analyst, who said Thursday there’s an “extremely long shot” of returning to last summer’s prices, as oil prices continue to fall.

Key Facts

GasBuddy head petroleum analyst Patrick De Haan said in a Tweet Thursday he doubts the national average for a gallon of gas will hit $4 this summer, predicting peak prices will be at least $1 lower than last summer’s all-time record of $5.02.

DeHaan argued “a LOT would have to go wrong to get anywhere near” last summer’s peak, writing he “strongly” disagreed with a prediction by a Mizuho Financial Group analyst who claimed in a Reuters report that plummeting gasoline inventory and increased travel could possibly bring retail prices to $5.

The national average for a gallon of gasoline would need to surge by more than 56 cents in order to hit the $4 mark, according to data from AAA, which pegs the national average at $3.44, with motorists in California and Hawaii paying the most ($4.83 and $4.82, respectively) and customers paying the least in Mississippi ($2.99) and Oklahoma ($3.01).

AAA spokesperson Andrew Gross attributed the drop in prices to “waffling” oil prices, which fell to a 15-month low last week, with the U.S. benchmark West Texas Intermediate dropping nearly 6% last Wednesday to $66.93—though it’s since rebounded slightly to $69.54.

Gross said he believes the low price of oil, which is refined into gasoline and diesel, will keep gas prices from soaring, even as a seasonal rise in demand is likely to bring prices up.

Contra

Gas prices have fallen over the past week despite a rise in gas demand and a decrease in inventories. In the seven-day period ending March 17, gas demand increased from 8.59 million barrels per day to 8.96 million barrels, according to new data from the Energy Information Administration. Gas inventories, meanwhile, decreased by 236 million barrels to 229.6 million over the past week—3.5% lower than this time last year, according to the EIA. Mizuho Financial Group director of energy futures Robert Yawger told Reuters the supply of gas could keep falling to below 200 million barrels.

Key Background

The price drivers pay at the pump has been steadily decreasing over the past week, according to AAA data, dropping from a national average of more than $3.46 a week ago to $3.44—nearly 80 cents lower than the national average this time last year. Gas prices had risen throughout the spring last year to their record high last June, amid uncertainties around global supply following Russia’s invasion of Ukraine, and as inflation reached a 40-year high. Prices steadily started dropping throughout the fall, hitting their lowest point on December 26 at $3.05, according to GasBuddy data. The decrease corresponded to a drop in crude oil prices, with international benchmark Brent Crude Oil falling from $139 per barrel last March to $82 in December and the West Texas Intermediate dropping from $115 to $71 over the same time period.

Tangent

The drop in oil prices comes as crude oil inventories shot up by roughly 1.1 million barrels to 481.2 million—more than 16% higher than they were this time last year, according to EIA data. At the same time, crude oil production in the U.S. increased by 100,000 barrels per day to 12.3 million barrels per day—700,000 million more than 12 months ago.

Further Reading

$5 Milestone: Gas Prices Hit An All-Time National High (Forbes)

Oil Prices Fall To 15-Month Low As Bank Failures Spook Investors (Forbes)

Gas Prices Plunge: National Average About The Same As This Time Last Year (Forbes)

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