Report: Fuel Price Forecast Looking Mixed at Best

While market analysts are projecting that fuel costs will be slightly lower in 2023 than they were last year, GasBuddy has released a report suggesting that the national average for a gallon of regular unleaded could still be as much as $4.00 by May.

In certain states (e.g. California), that’s likely to translate into $7.00 per gallon. Though GasBuddy felt reasonably confident that pricing would be more consistent than it was over the past 12 months, with annual projections leaving American drivers paying around $3.49 per gallon on average. Assuming everything goes according to plan, that is.

Still, it’s not exactly a return to the sub $3.00 averages enjoyed in the years leading up to the pandemic and would remain the highest average price the United States has seen (before Covid) since 2013. It should also be said that the energy price projections offered by government officials and market experts have frequently fallen short of reality these past few years, resulting in some trepidation among analysts.

"2023 is not going to be a cakewalk for motorists. It could be expensive," Patrick De Haan, head of petroleum analysis at GasBuddy, told CNN in an interview. "The national average could breach $4.00 a gallon as early as May – and that's something that could last through much of the summer driving season."

GasBuddy expects prices to climb as people begin driving more in the warmer months. Then, when refineries swap over to summer-grade gasoline, the U.S. will see another spike. This has the company assuming fuel prices will be as high as $4.25 per gallon in August before dipping closer to $3.00 by the end of 2023.

When fuel rates started pitching down late in the fall of 2022, your author remained perturbed. By lowering prices to a point where they were comparable to what was witnessed in late 2020, many people began cheerfully exclaiming that fuel costs were suddenly down. But some of us continued grinding our teeth and tried to remind people with the same capacity for memory as a goldfish that we hadn’t yet reached the national averages witnessed in 2019 – you know before the economy imploded after lockdowns and everyone collectively raised their prices.

The above is only being mentioned to offer some perspective. You may be fine paying higher energy costs overall if you find recent price reductions sufficiently soothing. It’s even somewhat understandable considering just how much more money everything has been costing of late. Frankly, any reprieve from a sustained beating is going to be welcome news to whoever is on the receiving end of those blows.

And that’s looking like what the end of 2022 was – temporary relief from exceptionally high energy prices.

GasBuddy is still projecting a higher per-gallon average for 2023 than we’ve seen since the last savage economic downturn wiped out a large portion of the middle class. It’s not alone, either. The Energy Information Administration (EIA) has likewise said that the national average is anticipated to average about $3.50 a gallon in 2023.

The rationale for these projections is down to refineries further increasing production in the coming months. But there is also a myriad of factors that are still driving up demand, with De Haan noting that a lot of the excuses we saw in 2022 will remain in play.

"Basically, curveballs coming from every direction," he said in reference to the wild swings that have taken place in the energy market. "Extreme amounts of volatility. I don't think we've ever seen such an amount of volatility as we saw [in 2022]."

CNN blamed the Russo-Ukrainian War as the primary culprit. While it certainly didn’t help matters, we know that fuel prices were actually surging upwards months before Russia made its move. The outlet also blamed Chinese lockdowns, which were mimicked by most Western nations (something CNN similarly failed to mention) and hampered global productivity for two years. Interest rate hikes from the Federal Reserve and the White House’s unprecedented use of the Strategic Petroleum Reserve were also cited as relevant factors. But greed has also become an issue, with energy companies seeing unprecedented profits of late.

In periods of economic turmoil, it’s fairly common to see industries trying to take advantage of inflationary spending. With the government devaluing its own currency, corporations have the perfect excuse to raise prices. However, the longer this goes on, the more money everyone is required to spend – leaving prices permanently elevated. While there’s no way to determine exactly where this tipping point occurs, we certainly seem to be somewhere in the middle of the process.

Regardless, the above factors are going to make any truly reliable forecasting for 2023 seriously difficult. We don’t really know what the Federal Reserve is going to try next, nor what tricks OPEC might have up its sleeve. China also appears to be incredibly hungry for fuel right now and remains in an incredibly volatile situation due to ongoing supply chain disruptions stemming from sustained lockdowns. Then there’s the war in Eastern Europe, which seems nowhere near ending and constantly runs the risk of roping in more nations.

None of those items are settled and GasBuddy likewise warned that natural disasters could result in regional prices surging for a time. The company warned that accurate forecasting would be very challenging and that 2023 still represented a “high level of uncertainty” in terms of predicting fuel pricing.

That means the U.S. could still average per gallon prices exceeding $5.00 by the summer.

"It's not impossible," De Haan said, "merely improbable at this moment."

[Image: Maridav/Shutterstock]

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