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Gasoline prices set to rise next month, fall for year

Good news for drivers: Higher oil output and better fuel efficiency are clipping prices.

By Money Staff Jan 24, 2014 2:48PM

This post comes from Myra P. Saefong at partner site MarketWatch.


MarketWatch on MSN MoneyThis year is set to be another volatile one for gasoline, with higher pump prices likely in the next several weeks, but consumers may be left smiling in the end.


Gas pump © ComstockThe average U.S. price for regular gasoline fell in 2013 from the year before, and experts predict that prices are likely to fall again this year.


"Fundamentals for gasoline are improving for the U.S. consumer, with retail prices to gradually decline this year from 2013," said Brian Milne, energy editor and product manager at Schneider Electric.


The price per gallon for regular retail gasoline averaged $3.505 in 2013, down from $3.618 in 2012, according to the Energy Information Administration. The government predicts further declines to averages of $3.46 this year and $3.39 for 2015.


Primary reasons for the shift to lower fuel prices include "less demand amid greater vehicle efficiency and a behavioral change in the U.S. consumer, and a revival in U.S. crude production, with output now at a 25-year high and still climbing," said Milne.


"Higher crude output is by far the leading catalyst for the lower trend in gasoline prices," he said.


The daily average U.S. price for regular gasoline stood at $3.287 a gallon on Thursday, down from $3.32 at the start of the year, according to AAA.


Prices had been slowly dropping across the country, with the national average down 16 out of the previous 19 days -- up until Wednesday’s increase, said AAA spokesman Michael Green.


"We are about to enter a period of rising gas prices as the seasonal maintenance period begins," he said, noting that in 2013 the national average increased 50 cents per gallon from Jan. 18 to Feb. 27. Some refineries have already begun maintenance but the bulk will begin in February and could last through late spring, he said.


"Prices are likely to rise soon as the market anticipates widespread seasonal refinery maintenance," said Green. "Drivers should expect to pay more for gas in February."


Roller-coaster ride

Factor in that spring refinery maintenance, the recent cold weather's impact on demand and refinery production, and the upcoming summer driving season, and the market is poised for another roller coaster year.


Schneider Electric's Milne expects prices to peak early in the second quarter, with average prices moving between a low of $3.25 and a high of $3.75 a gallon during the year.


U.S. gasoline prices will see "huge swings in regional volatility in 2014," according to a fuel outlook report from GasBuddy.com, a group of local websites that allow visitors to post and view recent retail gasoline prices.


Of immediate issue has been the severe cold in the eastern part of the United States this month. That hurt refinery production for the fuel as well as gasoline demand.


“Many people have stayed home from work due to snow days, which means that thousands of drivers that normally would have been on the roads burning gasoline were instead at home," said Green.


The latest EIA data (.pdf file) show that demand has slipped. Motor gasoline supplied, which offers a measure of demand, averaged over 8.3 million barrels per day during the last four weeks to the week ended Jan. 17, down 0.1 percent from the same time a year ago.


"It is possible that very cold temperatures could disrupt refinery operations like we saw with the polar vortex" earlier this month when 13 refineries had problems, Green said. "But any problems should be offset by the corresponding decrease in demand."


Taking a look at the bigger picture, the usual support for higher gasoline prices will come from U.S refinery maintenance, storm threats, and oil disruptions in the Middle East and North Africa, according to the GasBuddy.com report. For the spring, GasBuddy.com predicts a peak of $3.83 a gallon.


But this may "be a year that will find more consistent downward pressure on U.S. prices than in any year since the Great Recession," it said.


"Thanks to the shale oil boom and continued growth in Canadian oil sands, one might call the United States the 'Insulation Nation,'" the report said. "North American production increases in recent years have more than made up for the loss of Libyan crude, or world barrels lost to Iranians sanctions."


GasBuddy.com expects the year’s average to fall below $3.40 a gallon for the first time since 2010, when motor fuel averaged $2.78 for the year.


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7Comments
Jan 24, 2014 5:43PM
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Big oil and big business have been gouging the American consumer for decades with the blessings of the politicians! They look for ANY excuse to raise prices. As soon as the experts announce the price of gas is going lower, they come up with a reason to raise it!! As I said before, If a camel passes wind in the desert look for an increase in gas prices!!
Jan 24, 2014 4:42PM
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Until gas prices fall to $1.50/gal and stay there for some time, there is no reason to cheer.
Not gonna hold my breath...
Jan 24, 2014 9:09PM
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This is nuts. Let's start extracting the oil resources that we have. I'm so sick of being under the rule of Sheiks that live in incredible luxury while the rest of their people are beyond poor. You folks that want to scream about 99% and 1% should check out some other countries. You want to see poor? Go visit the Middle East.

Jan 25, 2014 1:09PM
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It might be a good idea for the refineries to re-open those that they closed or cut production on to keep prices high.  Might also want to stop exporting and refine our US oil to sell as gasoline in the US.
Jan 26, 2014 11:38AM
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Whats price for gallon gas in iraq
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