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Economic Forecasts

Gasoline Prices Starting to Heat Up

Kiplinger's latest forecast on the direction of energy prices

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GDP 3.0% pace in '18, up from 2.3% in '17 More »
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Interest rates 10-year T-notes at 3.2% by end '18 More »
Inflation 2.6% in '18, up from 2.1% in '17 More »
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Energy Crude trading from $60 to $65 per barrel in June More »
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Trade deficit Widening 5%-6% in '18 More »

Gasoline prices keep marching higher as spring unfolds. At $2.71 per gallon, the national average price of regular unleaded is up a nickel from a week ago and almost 20 cents from a month ago. Higher oil prices account for some of the run-up, as do heavier springtime demand for gas and refineries’ switchover from winter gasoline blends to summer versions (which cost more to produce). Expect the pain at the pump to worsen in the next few weeks, with the national average price likely to surpass $2.80 soon. Diesel, now averaging $3.01 per gallon, is also up and will probably climb another nickel or so by May.

Conflict in the Middle East leading up to last week’s U.S. airstrikes on Syria has caused crude oil prices to rally, with benchmark West Texas Intermediate recently trading at more than $66 per barrel. The question is, will prices pull back now that the allied shelling appears to be over? Syria produces little oil to begin with. And if the U.S.-led action doesn’t signal the beginning of a broader Middle Eastern conflict, then there’s little reason to fear disruptions to the region’s prolific oil production. Meanwhile, U.S. oil output keeps climbing and energy firms keep putting more rigs to work drilling new wells, which should boost supply and help keep a lid on prices. We look for WTI to trade from $60 to $65 per barrel in June.

Via E-mail: Energy Alerts from Kiplinger

Natural gas prices remain subdued, with the benchmark gas futures contract recently trading at $2.76 per million British thermal units (MMBtu). The chilly spring weather has depleted stockpiles of stored gas, which ought to be bullish for prices. But traders are evidently betting that robust U.S. gas production will be enough to rebuild those stockpiles once milder temperatures arrive and heating demand dies down. We see gas continuing to trade below $3 per MMBtu this spring.

Source: Department of Energy, Price Statistics