Energy: Gasoline Prices in Temporary Lull

Gasoline prices have stopped rising for now. But look for them to creep higher this spring as more Americans take to the roads. The combination of spring weather and progress in bringing the COVID-19 pandemic under control will likely encourage people to drive more, whether to commute to work or to travel. Indeed, U.S. gas consumption, which cratered last year during pandemic-related restrictions, is almost back to its prepandemic level. According to the latest data from the Department of Energy, gas consumption has been running about 15% higher in recent weeks than during the same period a year ago, when so many people were working from home or had lost their jobs. At $2.87 per gallon, the national average price of regular unleaded is virtually unchanged from a week ago. Still, with higher demand for fuel, we look for the national average to hit $3 sometime this spring. That hasn’t happened since 2014. Diesel, now averaging $3.08, is also holding fairly steady, but should drift higher as spring progresses.

Oil prices look like they’ll continue to oscillate in a narrow range, with benchmark West Texas Intermediate hovering around $60 per barrel. WTI had climbed to $66 earlier this year, but new viral outbreaks in Europe and new government lockdown orders there have crimped oil demand and caused prices to pull back. Plus, energy companies have accelerated their oil drilling in the United States lately, which indicates more production in the near future. Also, OPEC and its allies have announced plans to ramp up their own production in coming months. So, while world oil demand is still being hurt by the virus, global oil output is likely to rise: A recipe for keeping prices from rising much. We look for WTI to remain near $60 this spring.

Natural gas prices will remain muted. After spiking well over $3 per million British thermal units during the severe cold snap that hit Texas in February, the benchmark gas futures contract has declined to about $2.50. Odds are it’ll stay close to that level this spring, when demand for gas is typically low. If this summer features a lot of severe heat, gas prices could get a lift as power plants run hard to power air conditioners. But for now, don’t look for any rallies in the natural gas market.