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CNN Business
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Gas prices will likely be much cheaper overall next year. Still, the national average could still climb back above the $4-a-gallon threshold as early as May, according to GasBuddy projections shared exclusively with CNN.
The good news is that GasBuddy, an app that tracks fuel prices, doesn’t expect a repeat of this year’s wild swings who at some point sent gasoline prices above $5 a gallon for the very first time. This spike set off the recession alarm bell, worsened inflation and undermined consumer confidence.
The national average for regular gasoline, a measure closely watched by Wall Street, Main Street and even the White House, is expected to drop to $3.49 per gallon in 2023, down about 50 cents from the average for this year, according to GasBuddy.
That recharge time could prove significant, translating into families spending an average of $277 less on fuel for the year. If confirmed, total spending on gasoline in the United States would fall by about $55 billion, according to forecasts.
The bad news is that GasBuddy expects the national average to rise from $3.10 a gallon today to a range of $3.52 to $4.05 in May as Americans hit the road.
“2023 will not be a cakewalk for motorists. It could get expensive,” Patrick De Haan, head of oil analysis at GasBuddy, told CNN. “The national average could top $4 a gallon as early as May – and that’s something that could last for much of the summer driving season.”
Gasoline prices typically rise as summer approaches as more Americans hit the road in hot weather. In addition to the demand recovery, rrefiners switch to summer gasoline, which is designed to improve air quality and costs more to produce.
GasBuddy’s forecast calls for the national daily average to hit $4.25 a gallon in August before dropping to $3 a gallon by year’s end.
The federal government has released projections similar to GasBuddy’s.
Earlier this month, the Energy Information Administration (EIA) said the national average is expected to averages about $3.50 per gallon In 2023 as refineries continue to ramp up gasoline production.
The past year shows how difficult it can be to predict energy prices.
Hardly anyone expected the peak to hit $5.02 a gallon in June. But that all changed after Russia invaded Ukraine, raising the specter of severe supply shortages.
Beyond the war, energy markets have been rocked by a series of major forces, including China’s Covid-19 shutdowns, recession fears, oversized Federal Reserve interest rate hikes and the White House’s unprecedented use of the Strategic Petroleum Reserve.
“Basically, curveballs coming from all directions,” De Haan said, describing the swings in energy markets. Extreme amounts of volatility. I don’t think we’ve ever seen such volatility as we’ve seen this year.
The 2022 experience means that forecasts for 2023 should be taken with a grain of salt.
Prices over the next 12 months will be dictated by developments in the war, the Federal Reserve’s fight against inflation, OPEC policy, China’s Covid restrictions, a potential economic downturn and possibly other forces that are not even known at this point.
In its report, GasBuddy notes that there is a “high level of uncertainty” in 2023, “making an accurate forecast very difficult”.
For example, De Haan said a recession in the United States would hurt energy demand and likely drive prices below the $3.49 average predicted by GasBuddy.
On the other hand, a major hurricane or sudden refinery shutdowns could result in higher than expected prices.
Yet, some uncertainty remains.
“That’s probably the second most difficult prediction,” said De Haan.
The hardest? It was last year.
In December 2021, before Russia gathered troops on the Ukrainian border, GasBuddy Screening the national gas average would be $3.41 per gallon in 2022. This proved optimistic as prices took off after the invasion.
But in March 2022, GasBuddy revised its call to report on the war and projected the national average to be $3.99. That forecast was accurate, with gasoline prices on track to end the year around that level, or maybe a few cents lower.
After hitting $5 a gallon in June, gasoline prices have been on a remarkable decline, especially lately. The national average is now about 20 cents below the same period a year ago, according to AAA.
The plunge to 18-month lows was driven by a range of factors, including the return of refineries sidelined earlier this year, recession fears, record releases of emergency oil by the Biden administration and the fact that Russia’s oil supply has not been severely damaged by the war in Ukraine and Western sanctions.
Gas prices are unlikely to return to $5 this summer – although GasBuddy isn’t ruling that out.
“It’s not impossible,” De Haan said, “just unlikely right now.”
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