Are we headed for $5 gasoline?

Are we headed for $5 gasoline?

There are a few pumps in California that are already priced at that lofty level. Experts expect prices to continue rising into June, when gasoline pump prices normally peak.

Rumors abound that America is headed for $5 gasoline. But aside from a few California pumps priced above a "Lincoln $5 bill", Tom Kloza, chief oil analyst with Oil Price Information Service, contends a $5 U.S. average is still a few years down the road.

If you didn't lock in fuel prices before the Mid-East uprisings, consider waiting until the turmoil and oil price speculation settles. Kloza expects prices to continue rising through Memorial Day and into June, when gasoline pump prices normally peak. "Prices will rise, irrespective of what happens to crude oil," he predicts.

Neil Gamson, petroleum analyst for the U. S. Energy Department's Energy Information Administration, agrees. "Pump prices will likely rise further through spring, since recent crude oil increases haven't been fully passed through to gasoline prices."

Now for EIA's disclaimer: "There's significant uncertainty surrounding this forecast. Current market prices of gasoline futures and options contracts suggest a 25% probability that the national monthly average retail price for regular gasoline could exceed $4 per gallon during summer 2011."

What will be the impact on your fuel bill this year and next?

EIA tracks global natural gas and petroleum product reserves and predicts fuel price trends. Here's what it projected in early March for 2011 and 2012:

* Average regular-grade retail gasoline prices, with state and federal taxes averaging 49 cents a gallon, are projected to rise from $2.78 in 2010 to $3.56 per gallon in 2011 and $3.57 per gallon in 2012. Rising crude oil prices are the primary reason for higher retail prices. But higher refining margins are also plugged into the projections.

On-highway retail diesel fuel (taxes included) will rise from the 2010 average of $2.99 to $3.81 per gallon in 2011, and $3.82 in 2012. State and federal taxes average 52 cents a gallon.

Residential heating oil is likely to jump from the 2010 national average of $2.97 to $3.70 per gallon in 2011 and $3.90 in 2012.

Residential natural gas will be up only slightly from 2010, with average 2011 price at $11.20 per million cubic feet, then jump to $11.92 in 2012 as supplies begin tightening.

The accompanying table breaks out EIA gasoline projections for five regions of the country.

When is best time to tank-up? It's during the off-season, not now!

Looking at EIA's monthly price projections, gasoline prices peak by July. The best time to price gasoline may be in mid- to-late fall.

Diesel fuel prices trends don't have the same volatility. Average national on-highway retail prices tend to run highest during winter months. In 2011, for example, diesel (taxes not included) went from January's $2.87 a gallon to April's $3.38, then back to $3.33 for December. In 2012, EIA projects on-highway diesel peaking at $3.35 in January, then dropping $3.23 by December.

But when it comes to oil-based fuels based in these volatile markets, the best guess is still just a guess.  Summing up: Unless bigger troubles erupt in Mid-East, $5 gas is still a ways off; regular gas may average $3.56 a gallon with taxes in 2011; on-highway diesel fuel may average $3.81 this year, with taxes.

 

2011-2012 Retail Fuel Price Projections

 

 

 

 

 

2011

Peak

2012

Peak

Diesel (U.S. on-highway retail w/ taxes)

$3.81

$3.90

$3.82

$3.88

Regular gas (East Coast)*

$3.03

$3.20

$3.04

$3.14

Regular gas (Mid West)*

$3.02

$3.20

$3.02

$3.14

Regular gas (Gulf Coast)*

$2.99

$3.18

$3.01

$3.12

Regular gas (Rocky Mountain)*

$3.01

$3.25

$3.06

$3.19

Regular gas (West Coast)*

$3.20

$3.41

$3.22

$3.35

Regular gas (U.S. retail price w/ taxes)

$3.56

$3.75

$3.57

$3.99

* State and federal taxes not included. Source: U.S. Energy Information Administration (3/9/11)

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