Gas market headed for time of year when prices ‘can jump very quickly’
Americans are likely to spend about $27 billion less on gasoline this year than last, but prices are set to spike as the spring refinery maintenance season kicks in.
The average U.S. price for a gallon of regular gasoline stood at $1.806 late Friday, according to GasBuddy.com. That’s down 23.6 cents from last year’s average of $2.042 a gallon.
But prices have a ways to go before they hit their peak this year, according to Tom Kloza, global head of energy analysis at the Oil Price Information Service.
He sees a high around $2.50 a gallon for gasoline this year, and it won’t necessarily be because of a rally in crude. He thinks a “substantive meeting between delegates from Russia and OPEC is as likely as a substantive meeting between Donald Trump and Rosie O’Donnell.”
Even so, Michael Green, a spokesman for AAA, said that if crude stabilizes above $30 a barrel, “then most drivers may soon pay more at the pumps.”
“We are entering the time of year when gas prices can jump very quickly,” Green said. “ It’s common for gas prices to jump this time of year as refineries conduct seasonal maintenance, which means the days of paying less than $2 for gas might be numbered.”
Kloza said that gasoline may rally, in part, “thanks to money flow with speculative funds, hedge funds, algorithmic investors ... chasing April or May futures higher because of upcoming refinery turnarounds, [a] slight year-on-year demand lift, and the difficulty in making spring/summer gasoline specification of gasoline.”
Futures prices for gasoline may even trade at twice the value of crude-oil futures—with a $1.78-a-gallon reformulated gasoline futures equal to about $75 a barrel, he said. “We may indeed see gasoline in the $70’s per barrel, with crude in the $30’s.”
On Friday, gasoline futures settled above $1.13 a gallon, while West Texas Intermediate crude finished at $33.62 a barrel.
Within days, retail gasoline prices may see an off-season low, maybe at $1.79-ish, and t hen prices may climb to something closer to $2.50 in the second quarter, he said.
“This wouldn’t be exceptional or unusual—it would simply match last year’s rally,” he said.
OPEC predicts an average price of $2.149 to $2.249 a gallon for gasoline. That would mean U.S. divers are set to pay about $306 billion for gasoline this year, compared with $333 billion in 2015, said Kloza.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefo
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