Friday, May 25, 2018
Business

Gasoline prices predicted to fall in 2013

NEW YORK — At least gasoline should cost you less in 2013.

Hamburger, health care and taxes are all set to take a bigger bite out of the family budget this year. But drivers' annual gas bills are expected to drop for the first time in four years.

Forecasters say ample oil supplies and weak U.S. demand will keep a lid on prices. The lows will be lower and the highs won't be as high compared with a year ago. The average price of a gallon of gasoline will fall 5 percent to $3.44, according to the Energy Department.

"Everything is lining up to lead to softer prices this year," said Tom Kloza, chief oil analyst at the Oil Price Information Service.

"It's a little benefit to the economy, and it's a little more reason the Fed doesn't have to worry about inflation," said James Hamilton, an economist at the University of California at San Diego who studies energy prices.

Forecasters caution that they can't predict other factors like Middle East tensions, refinery problems or hurricanes along the U.S. Gulf Coast — in other words, the same events that caused gasoline prices to spike in 2011 and 2012. Any or all of those troubles could crop up again in 2013 and push pump prices above last year's record average of $3.63 a gallon.

The government expected gas to average about $3 during 2011. Then came the Arab Spring, which included the shutdown of Libya's oil production. Oil prices shot up, and gasoline averaged $3.53 for the year. The government's forecast for last year also turned out to be too low, by 18 cents per gallon.

Gas prices set records each of the past two years for a few reasons. Global demand has risen as the developing economies of Asia, Latin America and the Middle East burn more gasoline, diesel and jet fuel. At the same time, unrest in the Middle East has sparked fears of widespread supply disruptions in a region that produces a quarter of the world's oil. That makes traders willing to pay higher prices up front for oil as a way to protect against possible dramatic price spikes in the future.

In the United States last year, several refineries and pipelines had problems that reduced gasoline supplies, especially on the West Coast and in the Midwest, helping to push pump prices even higher.

This year, global oil demand is expected to rise slightly again, but increased production, especially in the United States, should keep supplies ample. The U.S. Energy Information Administration said this week that American production will grow next year by 900,000 barrels per day, the nation's biggest single-year increase ever. By 2014, U.S. production will reach its highest level since 1988.

At the same time, U.S. gasoline consumption is back down to 2002 levels because of more fuel-efficient cars and the tepid economy. It isn't expected to rise this year or next, according to the Energy Department.

That means the U.S. will need to import less oil, which will increase global supplies and help tamp down prices somewhat.

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