Gasoline prices predicted to fall in 2013

At least gasoline should cost you less in 2013.
Associated Press
Jan 13, 2013

 

Hamburger, health care and taxes are all set to take a bigger bite out of the family budget this year. But drivers' annual gas bills are expected to drop for the first time in four years.

Forecasters say ample oil supplies and weak U.S. demand will keep a lid on prices. The lows will be lower and the highs won't be so high compared with a year ago. The average price of a gallon of gasoline will fall 5 percent to $3.44, according to the Energy Department.

"Everything is lining up to lead to softer prices this year," said Tom Kloza, chief oil analyst at the Oil Price Information Service.

That would still be the third-highest average price ever. But a discount of 19 cents per gallon from 2012 would save the typical household $205 this year and free up $25 billion that could go instead to restaurants, malls or movie theaters — the kind of consumer spending that accounts for 70 percent of American economic activity.

"It's a little benefit to the economy, and it's a little more reason the Fed doesn't have to worry about inflation," said James Hamilton, an economist at the University of California at San Diego who studies energy prices.

Forecasters caution that they can't predict other factors like Middle East tensions, refinery problems or hurricanes along the U.S. Gulf Coast — in other words, the same events that caused gasoline prices to spike in 2011 and 2012. Any or all of those troubles could crop up again in 2013 and push pump prices above last year's record average of $3.63 a gallon.

The government expected gas to average about $3 during 2011. Then came the Arab Spring, which included the shutdown of Libya's oil production. Oil prices shot up, and gasoline averaged $3.53 for the year. The government's forecast for last year also turned out to be too low, by 18 cents per gallon.

And, Hamilton said, consumer spending might not see a boost from lower gasoline prices because most Americans will be paying higher taxes. The expiration of last year's payroll tax reduction will cost an extra $579 for households making $40,000 to $50,000 in 2013, according to the Tax Policy Center, a non-partisan Washington research group.

But after average gas prices rose in 2010, 2011, and 2012, a little relief will be welcome in 2013.

Gas prices set records each of the past two years for a few reasons. Global demand has risen as the developing economies of Asia, Latin America and the Middle East burn more gasoline, diesel and jet fuel. At the same time, unrest in the Middle East has sparked fears of widespread supply disruptions in a region that produces a quarter of the world's oil. That makes traders willing to pay higher prices up front for oil as a way to protect against possible dramatic price spikes in the future.

In the U.S. last year, several refineries and pipelines had problems that reduced gasoline supplies, especially on the West Coast and in the Midwest, helping to push pump prices even higher.

This year, global oil demand is expected to rise slightly again, but increased production, especially in the U.S., should keep supplies ample. The U.S. Energy Information Administration said this week that American production will grow next year by 900,000 barrels per day, the nation's biggest single-year increase ever. By 2014, U.S. production will reach its highest level since 1988.

At the same time, U.S. gasoline consumption is back down to 2002 levels because of more fuel-efficient cars and the tepid economy. It isn't expected to rise this year or next, according to the Energy Department.

That means the U.S. will need to import less oil, which will increase global supplies and help tamp down prices somewhat.

The current average retail price of gasoline is $3.31 per gallon, 6 cents lower than last year, according to AAA, OPIS and Wright Express. AAA predicts gas won't surpass $3.80 a gallon this year.

The peak last year was $3.94, reached in April. The auto club also says average pump prices could drop as low as $3.20, a level that the country hasn't seen since February 2011.

Tom Kloza of OPIS expects price differences between regions of the country will remain large, and local prices could be volatile as supplies build and dwindle. In Utah, drivers are paying $2.88 per gallon on average, while in New York drivers are paying $3.75. Just in the last four months, gasoline supplies on the West Coast fell to their lowest level in a generation, then rose to where they are now, their highest level in a generation.

AAA forecasts the national average will peak between $3.60 and $3.80 in the spring, then drop to between $3.20 and $3.40 by mid-summer. It will rise again during the hurricane season along the Gulf Coast, the nation's oil-refining hub, before moving lower toward the end of the year.

It's that up-and-down movement that will dictate drivers' moods. Drivers tend to remember what they paid for their last fill-up — not that they may have paid a little less a year ago, Hamilton said.

"People have a short reference point," he said.

 

Comments

OMG.LOL.WT_

I'll believe it when I see it!
“What goes up must come down.”― Isaac Newton
Does not apply to price of gasoline.

Contango

"Then came the Arab Spring, which included the shutdown of Libya's oil production. Oil prices shot up,"

Thank Mr. Obama for goin' to war in Libya in order to help keep U.S. oil prices down.

For those of you who are bothered by prices and think that oil cos. are "rollin' in dough," buy some shares of (VDE) or (XOM) and share in any profits.

44846GWP

You just keep driving your Jap car. Winnie, great American.

Factitious

The story is about Gas going down, yet it took him about 8 minutes to blame Obama for the price going up. Sheesh!

Contango

@ Factitious:

You may want to read my comment again about thanking Mr. Obama. Sheesh!

Hey! If it takes the lives of a few Libyans to help keep oil prices down, whatofit?

phroggy

Oh good!! Now we can all go back to the gas guzzling SUV's, pickup trucks and sports cars we loved in 2005, 2006, and 2007!!!

Licorice Schtick

That's what the auto industry wants us to buy. They think we think bigger is better, and we keep trying to prove they're right.

The Answer Person

Wow...who knew? Those cursed republicans are at it again! How dare they lower gas prices. Romney probably is behind this...LOL!

Factitious

It's simple:

Price up? Omaba's fault.

Price down? See? No need to conserve!

herbie_hancock

Thats what they said last year, according to obama the lower the gas prices the worse our economy is doing...

shucks

The fear mongering Repugs had predicted that gas was going up to $8.00 a gallon if Obama was re-elected.

Agitprop.

gene44870

As I recall , the price per gallon of gas dropped to 3.059 between Thanksgiving and Christmas of 2012 , the statement that gas wasn't
cheaper then Febuarys cost of 3.20 isn't true and as I recall it might have been a couple cents cheaper then the 3.05 per gallion

Fromthe419

These articles are a waste of time. No one can say if prices will go up or down. Our weather people can't even get it right for the next 2 days yet alone for an entire year. There could be hurricanes, tornadoes or war in Iran or us getting involved in Syria. I'll make a prediction and be right...Gas will be lower than 5 dollars in Ohio for the next year.

wiredmama222

well, they put it in the paper...now the price is sure to go up. LOL. Every time they say this, the price goes back up again. I, too, will believe it when I see it.

vgoble

That $205.00 a year doesn't even begin to cover the 2% increase we are now paying in SS taxes so who's going to the mall now??