Look for gasoline prices to keep creeping higher this spring. In fact, the national average price of regular unleaded is likely to surpass $3 per gallon for the first time since 2014. In some states, average prices are already above the $3 mark, but nationally, we haven’t been there in almost seven years. Fuel demand is coming back as vaccinations slowly bring the COVID-19 epidemic under control, allowing more people to go back to work and school, or hit the road for a long-delayed vacation. Today, the national average price of regular stands at $2.88 per gallon. That’s up two cents from a week ago, and nearly a quarter per gallon from a month ago. Diesel is also climbing. At $3.11 per gallon, it’s up 26 cents from one month ago.
Crude oil prices had been gaining sharply, but it now appears that they have paused for the time being. West Texas Intermediate had risen to about $66 per barrel before it tumbled back to $60 last week. We think WTI will hold close to $60 in coming weeks, sometimes trading in the low $60s and perhaps sometimes in the upper $50s. Worldwide oil demand appears to be recovering from last year’s plummet. And OPEC is sticking to some of the production cuts it implemented when demand fell in 2020. Still, we think it will be hard for oil prices to rise a lot more from their present level. In the United States, energy companies are drilling more wells, now that oil prices have risen enough to make drilling profitable again. And it will be hard for OPEC to keep holding back production if it sees energy companies in Texas stealing its market share.
The rally in natural gas prices also looks to be over. After rising to about $3.20 per million British thermal units when brutal cold weather hit the midsection of the country in February, the benchmark natural gas futures contract has fallen back to about $2.50. The cold weather depleted stocks of gas held in underground storage, but that shouldn’t mean much for prices, now that spring is arriving across most of the country. Heating demand figures to remain fairly low, and it’ll be a couple of months before any major hot weather sparks heavy demand from gas-fired power plants. So, we look for gas prices to remain well under $3 per MMBtu for now.
Source: kiplinger.com