New Government Estimates Say Gas Prices Could Hit $4 Per Gallon this Summer
Retail gasoline prices have pulled back just a bit from record highs yesterday, but an updated government forecast tells of per gallon prices reaching $4 during this year’s summer driving season.
The U.S. Energy Information Administration released its monthly report on petroleum supplies and demand, which forecasts that monthly average pump prices will peak at about $3.60 per gallon during June. However prices are predicted to spike to as high as $4 a gallon at times. The revised forecast brings the government predictions more in line with the best guesses of many analysts who think that peak monthly averages may themselves hit $4 per gallon.
The EIA is also guessing that the high fuel prices will have a negative effect on consumer demand this summer. The agency is betting that gas consumption will fall by about 0.4 percent during the peak summer months and overall consumption will drop by 90,000 barrels per day for the year. Previous EIA estimates had consumption rising by 40,000 barrels a day.
+ Yahoo Finance: Gas Prices Slip, but Could Hit $4
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Comments
chartguy
These estimates are notoriously inaccurate. The actual price of gasoline is very highly dependent on economic activity. Gasoline is "at the margin". As economic activity expands, gas is one of the first places money is spent. As the economy contracts, gas is one of the first places spending is curtailed. As such, it's even more dependent on the credit cycle. My guess is that we've already entered the contraction phase of the credit cycle, and I would not be surprised to see lower gas prices by the end of the summer. Unfortunately, that will be because people will be spending so much less on everything.
tony2x
Here in SF $4 a gallon gas is already a reality. I paid $4.37 the other day for 91 Octane and regular was just over $4. Oh well, where I come from gas is over $10 a gallon and everyone drives cars with smaller engines. So I really can't feel sorry for my adopted countryfolk, ditch the V8s and start selling 1.4 and 1.6 litre engines, plus add some small diesels and suddenly $4 a gallon won't seem so bad.
I've heard the argument that with all the freeway driving we do here you need the big engines but Europe is one big continent and I would often drive across it in my little engined cars at 80-90mph. Worked fine for me. :)
chartguy
As I type FedEx and UPS stock are both down 3% today. Slowing economy means fewer shipments, means less demand for fuel.
Josh
tony2x
The problem is, gas went from $2.00/gallon to $4.00 gallon in about 5 years. The average time estimate for a "fleet" changeover is 20 years. When people claim they are stuck driving a V8 in 2023, your "I can't feel sorry for them" point of view will be more solid.
Trinks
Who didn't see this coming though? I'm surprised we didn't see $4 gas last summer, at least here in Illinois.
Brett
The recent increases have been driven not by the price at the barrel, rather by the speculation in the futures market. As such, a report like this will only increase speculation and continue to drive the price up. Thanks a lot EIA. Decreased demand is a latent market pressure that reacts more slowly(you know that retailers try to retain a higher price for as long as they can).
Josh
Brett,
While a report may drive prices higher in the short term, it could also help to set the peak. If the futures traders see that there a lot of indications that $4 is the peak, they'll start to go short and prices will come down once the price reaches $4. Without articles to suggest the peak, the articles predicting forever higher prices would have more strength, and we could be looking at $5 gas sooner than we otherwise would.
Mena
I don't see why this is a surprise. It's going to happen sooner or later. Like another poster mentioned, $4 a gal is already a reality in parts of CA. It's $3.79 for 87 and $3.99 for 91 right now where I live. And it will get higher going into the summer. I know demand is much lower right now, but we're not the only factor in gas prices anymore. Prepare to pay up.
Mike
Ridiculous. That's all I have to say.
Berg
4.00 would be cheap! Gas is 4.54 /us gal right now in Canada.
Russ Bellinis
If the prices keep going up, it makes the whole cafe standard even more ridiculous. Let gas prices set the market for cars. If prices are high enough, people who have to drive a lot will get more efficient cars. Those who want the v8 and are willing to pay the price for the gas will continue to buy what they can afford. I just wish politicians would quit having the attitude that doing something even if it is wrong is the way to fix a problem.
Mena
Russ,
I agree and will also say that despite CAFE, those that can afford to drive what they want will continue to do so.
Mena
MB's US sales are down 3.7% from last March although they had a record first quarter worldwide. C-class sales are up 88% from last year. C-class is up 66% in the US.
Greg
Berg, you're an insult to Canada for using the gallon as a measurement.
Ducati Minor
Diesel was already at $4.20 and approaching $4.30 per gal. That was fifty cents more than premium gasoline. So much for Consumer Reports' E320 Bluetec vs. LS600h comparo, which had diesel ten cents less per gal than premium gas.
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