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Gas Prices To Jump in 2021 as Country Mends From COVID-19 Featured

You’ll want to budget more for gas this year.

Big Idea

  • GasBuddy expects an average yearly boost of 27¢ per gallon
  • Gas prices will stay stay far under their previous records
  • Don’t forget to shop around for gas prices - you could save as much as $500 a year!
  • Retail gasoline prices are tied to the market price of crude oil and wholesale gasoline prices
  • Read more...

The national average could eventually hit $3 per gallon in 2021

The national average could eventually hit $3 per gallon in 2021 thanks to economic recovery associated with improvements in the COVID-19 pandemic

BOSTON – GasBuddy, the travel and navigation app used by more North American drivers to save money on gas, predicts today that 2021 may feature a sharp rally in gas prices by year end, warning that the national average could rise to as high as $3 per gallon should the nation broadly recover from the COVID-19 pandemic. While the risk exists for some pain at the pumps during the year, GasBuddy expects the yearly average will jump a more modest 27 cents per gallon in 2021.

Some highlights from GasBuddy’s 2021 Fuel Price Outlook include:

  • The nation’s yearly gasoline bill will rise to nearly $326 billion dollars, an increase of over $45 billion from last year as the average household sees their annual gasoline spending rise to $1,670.
  • The national average is forecast to rise as much as $1 per gallon from a low in January to a possible peak in July, as the nation continues to recover from the COVID-19 pandemic, boosting demand as Americans slowly return to pre-COVID behaviors.
  • While much of the U.S. population will see prices remain in the $2 per gallon range, major cities in California and Hawaii will spend the entire year over $3, while others, including Chicago, New York City, Philadelphia, Phoenix and Seattle are also at risk of seeing average prices over $3 per gallon in 2021.

While many unknowns remain about what factors may impact gas prices in 2021, the largest likely factor driving gas prices in the year ahead will be COVID-19, and whether there is a broad recovery after the severe shutdowns and restrictions that sunk gasoline demand and prompted Americans to work and learn from home. Other unknowns include whether oil production globally will return as quickly as demand may. Should production lack the rebound in demand, consumers are likely to be pinched at the pump. Lastly, President-elect Biden will soon assume the White House, and with it, the nation may see a large change in policy towards the oil industry and petroleum use.

“While Americans are nearly guaranteed to see higher gas prices in 2021, it’s not all bad news. Average prices are still likely to be quite affordable, but some distinct and unpredictable changes in the COVID-19 pandemic may leave their wallets a bit more empty this year,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “However, I’m very optimistic that we’ll see improvement in the pandemic and see gas prices stay far under their previous records, leading Americans to perhaps turn to the nation’s highways to seek happiness after a year of stress and challenges, slamming the door on what was an awful 2020.”

Find the full report linked here.

For those making resolutions, GasBuddy suggests shopping around at the pump with the free GasBuddy app and driving less aggressively: the savings could add up to $477 per year, or roughly $10 per tank. In addition, motorists can sign up for Pay with GasBuddy, a free program that links to your checking account and offers savings of up to 25 cents per gallon.

About GasBuddy

For budget-minded drivers, GasBuddy is the travel and navigation app that is used by more North American drivers to save money on gas than any other. Unlike fuel retailer apps, as well as newer apps focused on fuel savings, GasBuddy covers 150,000+ gas stations in North America, giving drivers 27 ways to save on fuel. That’s why GasBuddy has been downloaded nearly 90mm times – more than any other travel and navigation app focused on gas savings. GasBuddy’s publishing and software businesses enable the world’s leading fuel, convenience, QSR and CPG companies to shorten the distance between the North American fueling public and their brands. For more information, visit www.gasbuddy.com.

Forecasting Volatility

Unless something out of the ordinary or catastrophic occurs, little thought is given to the process by which gasoline arrives at our neighborhood convenience stores and gas stations. It is assumed that gasoline is always available whenever we need it. More often than not, most of us pay little attention to the fuel we rely on until prices at the pump surprise us. Events like major hurricanes, remind us that gasoline is very much a “just-in-time” commodity.When we take a closer look, we see that volatility is built into the price we pay at the pump because many components, both globally and locally, have a hand in simultaneously pressing those prices higher and/or lower. These components include: the specific time of year and the federal regulations that dictate whether ‘summer blend’ (June 1 through September 15 in much of the U.S.) or ‘winter blend’ (the remainder of the year in most areas) gasoline must be available, and how much; the strength of global economies; the relative value of major currencies; crude oil prices; supply and demand of oil and gasoline; refinery operations; pipeline logistics; state and local taxes; weather; OPEC policy; and, last but not least, politics, as President-elect Biden takes the reigns. While 2021 also contains an untraditional factor in COVID-19, it is expected that a vaccine will reduce the overall affects of the coronavirus as the year progresses.

Gasoline is a product derived from crude oil, and retail gasoline prices are tied to the market price of crude oil and wholesale gasoline prices. We find that oil prices are especially sensitive to geopolitical events that can impact the ample supply and timely delivery of these commodities. These events whether perceived or actual and whether positive or negative can influence prices. Gasoline prices are also subject to seasonal increases and decreases tied directly to both refinery maintenance season (spring and fall) and the Clean Air Act, which has been slowly elimination some pollutants from fuels. The purpose of these regulations is to reduce smog and pollution, especially in large metro areas across the U.S. during the peak summer driving season. The transition from “winter blend” to “summer blend” gasoline which takes place as refiners perform seasonal maintenance and results in a reduction in the amount of gasoline produced and have increased gas prices starting in February or March between 25 to 75 cents per gallon on average over the last decade.

This results in a rise in retail pricing that arrives every spring as refineries deplete their inventory of winter blend prior to the annual maintenance needed before they can begin production (in March and April) of the more expensive summer blend.

What is unpredictable are the unscheduled obstacles that refineries may encounter. In areas such as the West Coast and Great Lakes region, where gasoline is produced by a few dominant refineries, motorists are most susceptible to severe price spikes that are triggered when their refineries hit unexpected snafus (even brief ones) especially during a time of year when refineries are transitioning to a larger slate of localized blends. In addition, pipelines that carry refined fuels have had unexpected shutdowns in recent years that too may affect the price of fuels.Weather always represents a potential threat, Hurricanes Harvey and Irma in 2017 prompted widespread fuel disruptions and shortages in Texas and Florida. The impact was felt in every corner of the country due to the amount of gasoline production that was shut down after tremendous amounts of rain fell on Texas, the nation’s largest oil producing and refining state. Gasoline inventories plummeted and it took months to recover. There is no national emergency gasoline supply and significant events have the potential to challenge both fuel supply and prices. In 2019, wind events also caused some disruption in California, where such events may be more commonplace in the years ahead, due to electric utilities efforts to prevent forest fires. While last year’s record setting hurricane season and other such weather events had less impact on gas prices than is typical, this was largely due to a large reduction in demand due to COVID-19. As 2021 progresses and inoculations for COVID-19 rise, we may see such events playing a larger role again in price than was witnessed in 2020.

Sources: https://blog-content.gasbuddy.com/uploads/2020/12/2021-fuel-outlook-gasbuddy.pdf

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Last modified on Wednesday, 06 January 2021 14:53
Published in Arizona News
Patrick De Haan

Patrick De Haan is the head of petroleum analysis for GasBuddy, and has developed into the leading source for reliable and accurate information on gas price hikes. Recognized as a gasoline price expert, Patrick brings to GasBuddy and our readers all his assets to help consumers by giving reliable and accurate price forecasts.The San Jose Mercury News dubbed Patrick "one of the nation's most accurate forecasters" in 2012.

Besides keeping people up-to-date on the best local gas prices, GasBuddy also offers other ways to save money at the pump.

https://www.gasbuddy.com

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