Gasoline Prices for Next Year
Repost from my other blog with an updated note.
One of the most common questions I get asked by my friends is “What will be the price of gasoline?”
I have this rule of thumb that I learned by observation – I never really tested the theory till now. The rule I tell my friends just take the average of 4th quarter price of gasoline and you can expect the peak price in the driving season to be around 70 cents/gallon higher.
Once again with the magic of the Internet one can test that rule of thumb. I went back from 2010 to 2000 and discovered the US Gulf Coast (USGC) December average subtracted by the peak of next year driving season averaged 76 cents/gallon. Over the last five years the min was 40 cents/gallon and the max was 1.70 cents/gallon. Now of course my friends are focused on the retail price so I say if you are looking at the wholesale price you need to add another 70 cents/gallon to get to retail.
Clearly gasoline and the crude oil markets are seasonal. What I find really funny is the politicians and economist touting how petroleum prices were down over the last few months. Relative to last year our 4Q average YTD gasoline price is up by almost 30% – 58 cents/gallon. This does not bode well for next years driving season nor the economy. We could very likely see $4/gallon pump prices next year given the current prices.
Added note – beyond the simple seasonal demand trend of gasoline, prices also move up due to the cost to produce gasoline goes up. Gasoline blend changes in the summer time. This blend reduces the Reid Vapor Pressure (RVP) of the gasoline which makes it less likely to evaporate. Typically summer gasoline will have less butane which is more cost effective than other components that make up gasoline.
I can help you forecast any commodity through a fundamental approach of supply/demand and finding cross market dynamics. Please do keep All Energy Consulting in mind for your consulting needs. Let us write you a proposal.
Your Energy Consultant,