In another sign of how the global economy has rebounded from the initial pandemic restrictions and shutdowns, consider this…in 2020, the average price for a gallon of gas in the US was $2.17, according to GasBuddy. Now the group is forecasting that figure to be $3.41 in 2022. WAMC's Jim Levulis spoke with Patrick DeHaan, the head of petroleum analysis for GasBuddy, about the outlook.
DeHaan: Well, we believe that gas prices will continue to go up. The national yearly average this year in 2021 was $3.02 a gallon. Next year in 2022, we predict it to rise to $3.41 a gallon, nearly a 40-cent rise as the economy continues to mend and demand for gasoline globally remains strong amidst supply that is racing to catch up.
Levulis: And you mentioned that year-to-year increase. How does that jump compare historically?
DeHaan: You know, we have seen years that prices have come down 40 cents between one and another year, but I don't think we've had a forecast in which one year prices have made a 40 cent a gallon average jump in a year. That's a pretty hefty increase, but a sign of the times we live in where we are being influenced, or have been influenced by the pandemic, only for demand to come roaring back but oil production lagging behind.
Levulis: And are you able at all to break down the price forecast for areas of the Northeast?
DeHaan: Well, I think you're in Albany, right?
Levulis: That's correct.
DeHaan: So you know, Albany is priced at $3.45 gallon is probably a slightly higher risk of potentially hitting the $4 gallon mark simply because we're only 55 cents a gallon away. And typically, during an average year, gas prices climb 25 to 75 cents a gallon between winter and summer. And that certainly could put us right at that $4 gallon mark or very close. Now I will say that there's a lot of potential outcomes, obviously COVID makes it very difficult and tricky to accurately forecast prices. But, you know, unless we backtrack here with a variant that we can't figure out quickly, I think the immediate future is going to be higher gas prices not so much in January and February, but we'll likely start to see a surge in prices in March, April that lasts or potentially Memorial Day or even slightly beyond.
Levulis: Now, in November, President Biden announced the release of 50 million barrels of oil from the Strategic Petroleum Reserve that was meant to lower prices at the pump. Did prices drop because of that?
DeHaan: Well they dropped slightly in anticipation. But when President Biden made the actual announcement, oil prices actually went up. 50 million barrels is relatively small, just two and a half days of total US demand. But it's really in the details. Of the 50 million barrels, 32 million barrels would essentially be loaned to oil companies that had to be returned. And the remaining 18 million barrels essentially were an accelerated timeline that previously had already been scheduled to be released. So all in all, it was kind of a buzzkill. A little bit disappointing. And keep in mind, this is a global phenomenon. High prices for oil are not just something happening in the US. So any reserve release would have to be far more significant for a longer period of time to really make a dent in the imbalance between supply and demand.
Levulis: So if your forecast comes true that the nationwide average could reach above $3.40 a gallon in 2022, do you think the president will call for another release, perhaps a larger one from the reserves?
DeHaan: Well the president may try it again. There's no telling what he could potentially do. But again, this is a pretty big imbalance being seen globally, it would have to be very significant to make much of a difference. And I don't know that the president would have the capability to greatly alter the future of prices. No president would, simply because oil prices are something determined by global supply and demand, not just what happens in the US.
Levulis: And now in your analysis you also state that the higher prices go, the stronger the economy is. Can you break that down? Can you explain that to us?
DeHaan: Well, essentially the more people that are filling up at a higher price, you know, if demand doesn't start to decline, it's indicative that Americans have enough money to fill their tank. So strong demand is indicative of a very strong economy because the stronger the economy, the more Americans fill up, the more petroleum we use.
