If you’re like many, filling up your car every week hasn’t been a fun experience over the past couple of years. Runaway inflation and the War in Ukraine caused gasoline prices to spike in 2022, and while prices at the pump fell in 2023, they were still higher than they were a few years ago.
That was particularly true this summer driving season. A decision by OPEC and Russia to curb production to prop up prices caused gas prices to soar, reigniting inflation worries and costing drivers billions of extra dollars.
The summertime spike led many to believe that high gas prices were here to stay. However, GasBuddy’s Patrick De Haan wasn’t convinced. He wrote on the social media platform “X” (formerly 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 long before gas prices slid, and $2.99 per gallon prices became the most common price found nationwide.
What does De Haan think is on tap in 2024? GasBuddy just released a 2024 forecast that should raise eyebrows.
Gas prices surge as geopolitical instability and profiteering collide
Gas is made from crude oil, so what happens to crude impacts the prices we pay at gas stations. Refiners also have to turn a profit, so changes to their margins impact prices, too.
Gas prices are also dictated by demand, so they tend to rise in summer because of vacation trips and decline in the fall after Labor Day. Oh, and let’s not forget that prices are impacted by the swap to winter-grade gasoline in the fall, which includes cheap butane, and summer-grade in the spring, which doesn’t.
Ultimately, it’s supply and demand that drive gas prices up or down. However, seasonal tendencies shouldn’t be ignored, and manipulation from OPEC producers plays an important role.
For example, OPEC was likely happy to pocket profit when the Federal Reserve’s zero interest rate policy, or ZIRP, and fiscal stimulus payments in the wake of Covid caused crude oil and gas prices to spike in 2022. And they probably didn’t shed tears when the War in Ukraine created fear over Russian oil supply boycotts in the West, sending prices higher.
However, they weren’t very happy when prices fell because global Central Banks raised interest rates to slow economic activity, reducing crude oil demand. In the U.S. alone, the Federal Reserve raised the Federal Funds Rate from 0% in March 2022 to 5.25-5.50%.
Nor are they likely in a good mood about production in the U.S. hitting records thanks to surging oil well activity in the Permian Basin in Texas. Permian Basin oil production has increased from about 4.7 million barrels per day in 2021 to about 6 million barrels due horizontal shale drilling technology.
In fact, the ensuing sell-off in crude oil in 2023 disappointed OPEC so much that they responded by cutting millions of barrels of production in a bid to shore up crude, contributing to this past summer’s gasoline price spike.
Gasoline prices path will continue lower in 2024
Despite OPEC’s best efforts to offset Permian Basin production growth with supply cuts, crude oil and gasoline prices are down from their peak in September.
According to the U.S. Energy Information Administration, national average gasoline prices fell to $3.26 in December from $3.96 in September.
(GasBuddy’s average price on Thursday was around $3.11 a gallon, down about 4% on the month and 2.4% on the year.)
Meanwhile, the price per barrel of West Texas Intermediate crude oil has retreated to under $72 from a peak close of $93.68 on Sept. 27.
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De Haan predicts that the decline isn’t over. In GasBuddy’s 2024 gasoline price outlook he forecasted a path for gasoline that rises through May, before resuming a retreat to new lows by December. Overall, De Haan expects the national average gasoline price per gallon will 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 increase in gasoline prices isn’t too surprising, given seasonality. Prices tend to climb in the spring as refiners drawdown winter-grade inventories and shut down for maintenance ahead of the switchover to pricier summer-grade gasoline.
Nevertheless, higher prices in the first six months will largely remain below what we saw in 2023, according to EIA data.
For example, GasBuddy predicts average national gasoline prices will be 10%, 5%, and 2% lower than last year in January, April, and June, respectively. At their May peak, they’ll only match last year’s $3.67 per gallon price.
Moreover, rising gasoline prices return to lower prices in the final six months of the year should add plenty of additional dollars to consumers’ 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 prices falling from their May 2024 peak to $3.46 in September, and then, following the winter-grade swap over and end to summer driving demand, prices will retreat back below $3 per gallon by December.
If De Haan’s outlook proves accurate, he estimates that consumers will spend $32 billion less on gasoline in 2024 than they did in 2023.
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