Easing pandemic conditions fuel cost of filling up
The national decrease in COVID-19 cases and lessening of shutdown restrictions were the main drivers of rising gasoline prices this year, industry analysts said.
However, there are mixed forecasts as to what will happen at the pumps if we continue to make progress against the pandemic.
Just as skyrocketing case totals changed driving habits, reduced the demand for gas and prompted oil refiners to slash production, good news on the COVID front has somewhat reversed those trends, said Patrick De Haan, head of petroleum analysis for gasbuddy.com.
“As COVID goes, so have gas prices,” he said.
While GasBuddy believes prices will likely rise more heading into summer, the federal Energy Information Administration projects that prices will decrease somewhat as oil production gets closer to prepandemic levels.
Analysts agree, though, on what a stark difference COVID had on the cost of gas.
GasBuddy reported the average price for a gallon of regular in the Philadelphia region on Wednesday was $2.98, up from the first week of May last year, when it was $2.14.
But looking at prepandemic prices, GasBuddy said gas prices at the beginning of 2020 had been about $2.73 per gallon in the Philadelphia region and $2.60 nationally, a much smaller difference from the current national average of $2.89.
U.S. gasoline demand in the last week was the highest spring number released by EIA in two years, and only about 3 percent below the same week in 2019.
Other influences
There are factors other than the lessening pandemic that have increased gas prices, according to EIA, including two that occur each year: the annual switch to cleaner burning but costlier summer-blend gases that producers are required to make by May 1 each year; and the traditional increase in demand as warmer weather leads to more driving.
But the recent economic recovery also has played a part, according to the EIA.
“We expect that increased COVID-19 vaccinations and economic stimulus
efforts will contribute to a 15 percent increase in highway travel this summer,” said EIA economist Sean Hill. “That doesn’t get us back to 2019 levels, but it does create a demand increase that will affect prices.”
The EIA predicts crude oil will average $64 per barrel this summer, up 78% from last summer’s average of $36 per barrel.
Crude oil production has started ramping up in the U.S. and globally, and though it remains below prepandemic levels, refinery output and rising crude oil supply from OPEC and U.S. oil producers should begin to push down gasoline prices over the summer, EIA said.
They acknowledge, though, that their projections are uncertain.
For the summer, the EIA forecasts regular retail gasoline prices to average $2.78 per gallon, decreasing to an average of $2.62 by September.
No presidential impact
Though many are linking the beginning of President Joe Biden’s administration to the rise in gas prices this year, De Haan said the two are not connected.
“Gas prices are not determined by the president, but
by consumers filling their tanks,” he said.
Years from now efforts by the Biden administration to reduce the environmental impact of domestic oil drilling and to make vehicle fuel economy and emissions standards stricter could push gas prices higher, he said, but his early policy decisions have not affected the current supply.
“We have more than enough capacity,” he said.
De Haan believes that as more people are vaccinated, more workers return to their daily commutes, more jets are flying, more restaurants and tourist attractions open and more families drive farther on vacations, prices could continue to rise to $3.25 per gallon over the summer.
“People are feeling better, and they’re itching to get out. And there are places to go now,” he said. “We have cabin fever.”
But gas prices are also affected by global changes, and if the COVID surges that countries like India are experiencing continue, or if another surge happens in the U.S., we would likely see another drop in demand and prices dropping to about $2.85, he said.
“The worse things are, the lower the prices,” he said.