Gas Prices Hit Five Month Highs As Cost Surge Continues

Mixed Forecasts Predict Crude Could Soar Or Be About To Top Off.

weekly gas price trendA bounty of uncertainty appears to be affecting the commodities trading floor these days, at least where it concerns the direction of crude oil prices. One thing is for certain, however, and that is we are all paying more for gasoline. In fact, the latest survey from the U.S. Energy Information Adminsitration shows the national average price for a gallon of regular unleaded spiked at $3.44, the first time it has been above $3.40 since the end of September. Drivers in many regions have been paying considerably more than the national average, though. The pricing news is turning ever more bitter in some survey areas, such as the West Coast, where the cost of a gallon of gas has now hit $3.65. At the state level, drivers in California, Colorado and Florida experienced the worst week over week price increases.

Region by region, the cost of driving is likely to continue to rise during March, primarily due to spikes in crude oil prices in February. Those increases were driven by dwindling supply, increased overseas demand and geopolitical instability. Some of that instability has waned, but a rash of political instability in Venezuela threatens to disrupt that supply source, and there are worsening supply problems in Libya, where daily production is now about 20-percent of what it was last summer.

Commodities Traders Divided About Crude Prices Going Forward.

All of this points to uncertainty about global markets going forward, which means the American pocketbook could take a hit. A number of factors could put upward pressure on futures prices, which would be bad news for drivers. Those pressures including lingering problems in overseas supply, which means North American oil production would have to quench more of the global thirst for fuel. That could mean, too, that earlier EIA forecasts for lower gas prices in 2014 will fall flat, leading to a return to the price points seen in early 2013.

$5 Gas Prices Before Year End? That Depends.

May 2011 gas prices

Gas prices in Fort Lauderdale, Florida as they were in May 2011, two months after the WTI hit fresh highs. But prices then did not hit the $110 per barrel threshold, which one analyst is predicting could happen within the next three months.

The bigger issue, then, is how suppliers respond. Will production be increased to meet the anticipated growth in global demand, stabilizing the futures markets, or will demand exceed the ability of suppliers to keep pace? Sean Hyman of Moneynews told CNBC on Tuesday he expects demand will cause WTI to surge over the next three months, closing between $110 and $113 per barrel, further predicting WTI has the potential to go as high as $140 per barrel. Even if West Texas Intermediate rises to $113 per barrel, that could be enough to push retail gas prices up to and over $5.00 per gallon.

But Citigroup analyists say WTI has peaked for the quarter and, possibly, for the year. Edward Morse, the head of commodities research at Citigroup, predicted the price of WTI would rise in the second half of the year, but only after going through a series of declines during the rest of Q1 and through the second quarter. At the moment, WTI has come off its February highs, at least so far, but it remains above the crucial $100 per barrel threshhold.

Part of the reason for the about-face in WTI prices is an expected inventory boost, but that will not be known for certain until Wednesday morning. And while Citigroup is predicting the cost of WTI has hit a high for the first quarter of 2014, it did raise its overall WTI price target for 2014 by one dollar. Notably, Citi raised its Brent forecast for 2014 considerably, from $98 to $103, signaling an expected decline in overseas production.


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About Danny Pryor

Danny Pryor is a media, content and web developer with a long history in broadcast and print journalism. He is also the executive director of Turnpike Information Company. Danny has earned two awards from the Associated Press for his work in media, including Best Individual Achievement for Large Market Radio in Miami. He resides in Fort Lauderdale, Florida.