Analyst makes a bold prediction for gasoline prices in 2024

If you are like many, filling up your automobile each week hasn’t been a enjoyable expertise over the previous couple of years. Runaway inflation and the War in Ukraine triggered gasoline costs to spike in 2022, and whereas costs on the pump fell in 2023, they have been nonetheless increased than they have been a number of years in the past.

That was significantly true this summer season driving season. A call by OPEC and Russia to curb manufacturing to prop up costs triggered fuel costs to soar, reigniting inflation worries and costing drivers billions of additional {dollars}.

The summertime spike led many to imagine that prime fuel costs have been right here to remain. However, GasBuddy’s Patrick De Haan wasn’t satisfied. He wrote on the social media platform “X” (previously Twitter) on Oct 4, “GOOD NEWS: in the days and weeks ahead, we’re going to see hundreds, nay, thousands of stations with #gasprices at $2.99/gal or less.”

De Haan was spot on. It wasn’t lengthy earlier than fuel costs slid, and $2.99 per gallon costs grew to become the most typical worth discovered nationwide.

What does De Haan suppose is on faucet in 2024? GasBuddy simply launched a 2024 forecast that ought to elevate eyebrows.

GasBuddy’s Patrick De Haan, who appropriately predicted decrease gasoline costs in 2023, has launched his forecast for 2024. Photographer: Graham Hughes/Bloomberg by way of Getty Images

Bloomberg/Getty Images

Gas costs surge as geopolitical instability and profiteering collide

Gas is produced from crude oil, so what occurs to crude impacts the costs we pay at fuel stations. Refiners even have to show a revenue, so modifications to their margins influence costs, too. 

Gas costs are additionally dictated by demand, so they have an inclination to rise in summer season due to trip journeys and decline within the fall after Labor Day. Oh, and let’s not overlook that costs are impacted by the swap to winter-grade gasoline within the fall, which incorporates low-cost butane, and summer-grade within the spring, which does not.

Related: Long-time fund supervisor makes a daring crude oil prediction for 2024

Ultimately, it is provide and demand that drive fuel costs up or down. However, seasonal tendencies should not be ignored, and manipulation from OPEC producers performs an essential position.

For instance, OPEC was doubtless pleased to pocket revenue when the Federal Reserve’s zero rate of interest coverage, or ZIRP, and financial stimulus funds within the wake of Covid triggered crude oil and fuel costs to spike in 2022. And they most likely did not shed tears when the War in Ukraine created worry over Russian oil provide boycotts within the West, sending costs increased.

However, they weren’t very pleased when costs fell as a result of world Central Banks raised rates of interest to gradual financial exercise, lowering crude oil demand. In the U.S. alone, the Federal Reserve raised the Federal Funds Rate from 0% in March 2022 to five.25-5.50%.

Nor are they doubtless in temper about manufacturing within the U.S. hitting data due to surging oil nicely exercise within the Permian Basin in Texas. Permian Basin oil manufacturing has elevated from about 4.7 million barrels per day in 2021 to about 6 million barrels due horizontal shale drilling know-how.

In truth, the following sell-off in crude oil in 2023 disenchanted OPEC a lot that they responded by chopping thousands and thousands of barrels of manufacturing in a bid to shore up crude, contributing to this previous summer season’s gasoline worth spike.

Gasoline costs path will proceed decrease in 2024

Despite OPEC’s greatest efforts to offset Permian Basin manufacturing development with provide cuts, crude oil and gasoline costs are down from their peak in September.

According to the U.S. Energy Information Administration, nationwide common gasoline costs fell to $3.26 in December from $3.96 in September. 

(GasBuddy’s common worth on Thursday was round $3.11 a gallon, down about 4% on the month and a couple of.4% on the 12 months.)

Meanwhile, the worth per barrel of West Texas Intermediate crude oil has retreated to underneath $72 from a peak shut of $93.68 on Sept. 27.

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De Haan predicts that the decline is not over. In GasBuddy’s 2024 gasoline worth outlook he forecasted a path for gasoline that rises by way of May, earlier than resuming a retreat to new lows by December. Overall, De Haan expects the nationwide common gasoline worth per gallon can be $3.38 in 2024, down from $3.51 in 2023.

“The month of January (2024) will see the lowest prices at an average of $3.11 per gallon, while May could average around $3.67 per gallon, with a possibility, albeit brief, that the national average could touch $4 per gallon,” writes De Haan. 

The improve in gasoline costs is not too shocking, given seasonality. Prices are inclined to climb within the spring as refiners drawdown winter-grade inventories and shut down for upkeep forward of the switchover to pricier summer-grade gasoline.

Nevertheless, increased costs within the first six months will largely stay under what we noticed in 2023, in accordance with EIA information. 

For instance, GasBuddy predicts common nationwide gasoline costs can be 10%, 5%, and a couple of% decrease than final 12 months in January, April, and June, respectively. At their May peak, they’re going to solely match final 12 months’s $3.67 per gallon worth.

Moreover, rising gasoline costs return to decrease costs within the last six months of the 12 months ought to add loads of further {dollars} to customers’ wallets. 

“The global refining picture continues to improve, providing more capacity and peace of mind that record-setting prices will stay away from the pump this year. 2024 will feature some volatility, unexpected outages and disruptions, and potentially weather-related issues, but I do not expect it to feature record prices—anywhere,” says De Haan.

GasBuddy sees gasoline costs falling from their May 2024 peak to $3.46 in September, after which, following the winter-grade swap over and finish to summer season driving demand, costs will retreat again under $3 per gallon by December.

If De Haan’s outlook proves correct, he estimates that buyers will spend $32 billion much less on gasoline in 2024 than they did in 2023.

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