Energy: Gasoline Prices to Turn Higher

Gasoline prices are climbing, slowly but steadily. At $2.40 per gallon, the national average price of regular unleaded is up a penny from a week ago and 15 cents from a month ago. Fuel demand remains weak because of the continuing pandemic, but more drivers are back on the roads than there were when COVID-19 first struck the United States last spring. That partial recovery has helped lift gas prices off their lows. And we look for the price at the pump to keep edging higher as spring nears. Diesel, now averaging $2.64 per gallon, is also perking up.

Crude oil has staged a rally since the lows hit last year. Benchmark West Texas Intermediate, which traded between $35 and $40 per barrel in early November, has rebounded to more than $50 per barrel. But now, WTI seems stuck close to the $50 level. If more progress can be made on vaccinating enough Americans to bring the pandemic to an end, oil prices should push higher on expectations of increasing travel. Plenty of folks who have been working from home for the past 10 months could start to commute again, and vacation-starved consumers are no doubt eager to get out of the house once it’s safe to do so. Conversely, if it looks like the pandemic will linger for longer, oil prices could come under new selling pressure.

Natural gas prices rallied last fall, with the benchmark gas futures contract trading near $3 per million British thermal units after hitting a multidecade low of about $1.50 last summer. But futures have pulled back to about $2.60 per MMBtu recently, in part because winter has proved somewhat mild so far across much of the United States. Another price spike is possible if cold weather drives up demand for an extended period, especially in the heavily populated Northeast. But without a strong cold snap, we look for gas prices to pull back as winter turns to spring. The amount of gas in storage is a bit above average for this time of year, so a pickup in demand is likely needed in order to lift prices.