Will a gallon of unleaded gasoline reach $4 any time soon? Gas prices are rising again, so it may happen sooner rather than later.
Financial analysts say it’s possible, especially if things spiral out of control in the Middle East. Short of that, though, they see petroleum supply and demand coming into global balance. It would then settle into a kind of “sweet spot” that oil producers and consumers alike can live with.
In other words, forget about $2.50 a gallon gas. And don’t worry too much about prices going a lot higher than they have lately, because the expert consensus is that a steady rise in gas prices should soon even out.
As of Friday, Bakersfield’s average price of a gallon of unleaded at the pump stood at $3.60, up 4 cents from a week before, according to the AAA. Compared with a year earlier, Friday’s price represented a 62-cent increase.
Why are gas prices on the rise?
Part of the recent bump can be attributed to California’s switch to the so-called summer fuel formulation, which is intended to reduce evaporation and improve air quality. The automobile association says the transition adds 8 to 10 cents to the price of a gallon of gas.
Gasoline prices are generally tied to crude oil prices, which have gone through quite a rough ride in the last four years. A glut that peaked in mid-2014 has taken years to work out, as oil-producing countries cut back on production to bolster prices.
At the same time, the world economy has strengthened considerably, raising demand for fuel. Only recently have tensions in the Middle East added what’s known as a “geopolitical premium” to the price of a barrel of oil.
Nicole Decker, an energy sector strategist for New York-based UBS Wealth Management Research, said foreign oil producers could suddenly break from their pact to limit production, which could push prices lower. Domestic drillers could also ramp up activity and knock barrel prices back down again.
She sees West Texas Intermediate crude rising no higher than $80 per barrel during the next three months, then dropping back to $70 within a year. WTI was trading at about that level last week.
“Barring any economic setback, I think that the fundamental backdrop is very good,” she said.
Here are some tips for drivers:
- Consider carpooling,
- Slow down. Reducing your speed by even 5 mph saves money. Just try not to be a hindrance to other drivers,
- Avoid “jackrabbit” starts that burn fuel unnecessarily,
- Remove the “junk from your trunk.” A lighter vehicle burns less fuel.