Those who think gas prices are high now should fasten their seatbelt for some more pain at the pump in the coming weeks and months.
The average price of gas in the U.S. continued to rise slightly again this week for the fifth consecutive week and gas analysts predict more substantial increases to come in the next three to five weeks.
The average price of regular unleaded gas in the area sat at $3.12 per gallon as of Friday, up 14 cents over the past week and 24 cents since a month ago, according to AAA.
“It’s kind of the first big jump since about the 5th of January,” Patrick De Haan, head of petroleum analysis for GasBuddy, told this news outlet. “The roller coaster continues.”
Meanwhile, prices nationwide and the Buckeye State increased to $3.36 and $3.13 by Friday, a respective 3-cent and 8-cent rise compared to the week prior, according to AAA.
The recent price spike of a barrel of U.S. benchmark crude oil to a seven-year high of $87 a barrel represents a dizzying jump of about 36% since Dec. 1.
“There’s a lot cooking,” De Haan said. “Omicron cases (are) starting to decline and, obviously, we’ve got a heavy dose of geopolitical tensions that have flared up kind of out of left field.
That includes situations brewing in Kazakhstan Libya and the United Arab Emirates. Most urgently, Russia’s buildup of a military presence along the Ukraine border has raised fears of an imminent invasion and a consequential impact on global energy supplies.
When it comes to supply, “there’s plenty the market is concerned about right now,” De Haan said.
Where the state and nation sit right now is not too unfamiliar from 2021, when prices hovered around the $3.35 mark. The only reason prices aren’t higher now is because demand is “quite weak,” he said.
By mid-February, nationwide average price of a gallon of gas should increase to the 2021 high of $3.30. March, April and May should see increases every week to two weeks, De Haan said.
“Ten or 15-cent increases every couple of weeks and that could bring us close to $4 (a gallon) by Memorial Day,” he said. “I don’t know if Dayton will get there. Ohio tends to be a little bit under the national average, but it’s still possible that we could get very close.”
Those in the Dayton area are likely to see prices increase over a longer period of time because of price cycling, a pattern where stations ignore minor fluctuations in the market on a daily basis. Instead, most stations undercut each other a penny or two each day until they run out of margin, he said.
That is, until they’re no longer making any money. Then a retailer will raise their price 25 to 40 cents a gallon to pass along any price difference and to restore their margin to between 15 to 20 cents a gallon.
Oil production should recover in the months ahead, De Haan said.
“The high prices that I’m expecting will incentivize oil producers to increase production, but to their ability,” he said. “We’re actually running into a problem now where OPEC has increased its quotas, but members can’t produce as much as the quota says, so it’s kind of a Catch-22. They’ve increased their quotes but they can’t reach those higher quotas.”
Meanwhile, U.S. production is slowly increasing. By the end of the year, domestic oil production is expected to eclipse12 million to 12.5 million barrels a day.
“We’re at about 11.7 (million) right now,” he said. “Pre-COVID, we hit 13.1 (million). We’re working on getting there, back to pre-COVID, but oil companies are obviously taking it very slow and cautiously.”
Still, there is a lot that could change in the forecast over the next several months, De Haan said.
“I can’t remember a time when we had so much high-level influence from various factors — COVID, geopolitical tensions, the Fed. There’s just a lot in the oven,” he said. “This is not a guarantee. It’s where we think (prices are headed) given the outcomes, but no one’s got a crystal ball.”
The recent oil price spike reversed a nearly equally steep plunge that began in late October. Because oil has a direct effect on the prices of gasoline and home heating oils, consumers have been battered by the wild volatility.
What’s going on? For one thing, the ever-evolving state of the viral pandemic has wreaked havoc with both supply and demand. As a consequence, energy has been gripped by violent price swings.
“COVID has upended everything,” said Andrew Gross, spokesman for AAA. “It’s even made a lack of predictability even more unpredictable.”
The Associated Press contributed to this story.