The new year is expected to bring the highest gasoline prices since 2012, with the possibility that U.S. drivers could be collectively shelling out $52 billion more at the pump than they did in 2016, according to one prominent price tracker.
The average cost for regular, unleaded gas is expected to spike to $2.49 per gallon this year, up from $2.13 in 2016. That significant uptick is in marked contrast to the steady price drops consumers have mostly seen over the past four years.
“The era of falling prices from year to year is likely to be over,’’ says Patrick DeHaan, GasBuddy’s senior petroleum analyst.
Instead, U.S. drivers are projected to spend $354.6 billion on gas this year, a jump from the $302.5 billion doled out in 2016. While a potentially stronger jobs picture may make a steeper gas tab a bit less painful to individual consumers, it could take a toll on the overall economy.
The national average for a price of a gallon of regular gas on Tuesday was $2.347 a gallon, up from $1.992 a gallon a year ago, AAA's Fuel Gauge Report shows.
“This is removing $52 billion in one year’s time from motorists’ wallets,’’ says DeHaan. “Some motorists have been saving and putting into the bank whatever they’re not spending on fuel. And ... it may be an expense that creeps up on them and causes them to cut back in other areas.’’
The key reason for the price increases is the November decision by the Organization of the Petroleum Exporting Countries to pare back oil production, and the group’s subsequent success in convincing Russia and several other major oil producers to do the same. On Tuesday, a barrel of benchmark U.S. crude closed at $52.49, down $1.24 a barrel or 2.31%.
Just two years ago, gas prices plunged after OPEC’s announcement that it would produce as much crude oil as it could. “The attitude change in 2014 opened the door to cheap gas,’’ DeHaan said, and “the meeting this past November is shutting the door.''
A cross country drive may be most expensive in May, with the average gas price projected to peak at $2.67 a gallon nationally, while February is expected to feature an average price of $2.32 per gallon, the lowest of the year.
Those are the traditional months when drivers see highs and lows at the pump, with refineries often offering discounts to gas stations in February to drain their remaining winter gasoline supplies, while prices surge in the spring when refineries do maintenance and switch over to summer gas formulas that can be more expensive.
Warm-season gasoline is also a primary reason why motorists in some major cities may see particularly steep price increases. For instance, Los Angeles, Chicago and New York are among the areas that have different formulations, a “prime example of the logistical challenges that add to the prices we pay every spring,’’ says DeHaan.
Still, higher oil prices may get dormant oil drillers in the U.S. back to work, “and that would create a ceiling to how high oil prices can go," keeping them from soaring to the $3.34 a gallon that was the national average in 2014, DeHaan says.