Gas prices might be headed to record highs in 2012, analysts say
If you think gasoline is expensive now, just wait until next year: A combination of growing global demand and rising U.S. fuel exports could send gasoline prices to record highs in 2012, analysts say.
Those factors have been pushing pump prices to historically high levels since the beginning of September, and the approaching holiday weekend is expected to present a painful roadside example by breaking the old record for late November — set in 2007 — by 10% or more nationally and in California.
Regular gasoline nationally cost an average of $3.097 a gallon during the week leading up to Thanksgiving in 2007, and it cost an average of $3.398 in California. It might have been a relatively trivial annoyance then, as the country hadn’t fallen into recession yet.
But now, with high unemployment and little economic growth, the U.S. average gasoline price is $3.424 a gallon, the Energy Department said Monday, based on a weekly survey of service stations. Although that represented a decline of 2.8 cents from the previous Monday, the average was still nearly 56 cents higher than at this time last year and shattered the old record for this week of $3.013 a gallon, set in 2007.
In California, a gallon of regular gasoline is averaging $3.855, up 0.9 cent from a week earlier. That is substantially higher than the old record for this week of the year of $3.231 a gallon, set in 2007.
“We are at the highest fuel prices ever for this time of year, even though they have dropped a bit in recent weeks,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “I think we will see prices in 2012 that will break … records.”
Kloza said Americans are on pace to spend a record $489.7 billion on gasoline in 2011, which is $100 billion more than they did in 2010. The only year that came close was 2008, when U.S. motorists spent about $448 billion on gasoline; that year, the U.S. average peaked at $4.114 a gallon and the California average hit a record $4.588, but prices quickly declined from those summer highs.
Fuel price specialist Bob van der Valk said that oil prices, which have been creeping back toward $100 a barrel, eventually will boost gasoline costs.
On Monday, West Texas Intermediate crude futures rose $1.26 to $95.52 a barrel on the New York Mercantile Exchange, its highest finish since late July. In London, the price of global benchmark Brent North Sea crude climbed $2.59 to $114.56.
West Texas Intermediate crude “will be in the $110-a-barrel range next year,” said Van der Valk, an independent fuel consultant.
“We started high on gasoline prices this year and we stayed high, and we are going to go higher next year,” Van der Valk said. “We could be as high as $4.50 a gallon in California by Easter. The rest of the country will be above $4 a gallon by then.”
The primary reason for the stubbornly high prices is growing demand in Latin and South America, which is driving record U.S. exports of fuel to those parts of the world, particularly in the form of diesel. U.S. refiners are also making more diesel at the expense of gasoline production, Kloza said.
“Demand for gasoline is down in the U.S. by 4% compared to last year, but global demand has more than made up for that,” Kloza said. “If you want to blame someone for the high prices, blame South America.”
Van der Valk added, “Gasoline is being exported to Mexico and diesel is going to Chile, and it’s all keeping U.S. refineries huffing and puffing.”
But Patrick DeHaan, senior petroleum analyst for GasBuddy.com, a price-tracking website, pointed to one hopeful indicator for motorists: Gasoline prices, although high for this time of the year, still managed to decline in much of the nation during the last week despite rising oil prices.
“The national average is just one penny away from being the lowest we’ve seen since the start of March, even as crude oil prices have risen,” DeHaan said. “So it does remain surprising that average prices have moved very little.”