Low gas prices of 2012 on verge of evaporating

January 7, 2013

USA Today

Gary Strauss

That early winter break you've been getting at the gasoline pump? It's beginning to show signs of cracking.

Gasoline prices remain below $3 a gallon in at least half the outlets in 14 states, but the national average has crept up 3 cents to $3.30 a gallon in the past week. In addition, the average is up 8 cents since hitting a 2012 low of $3.22 in mid-December.

Prices are likely to rise in coming weeks. Crude oil is up about $10 a barrel in the past month; benchmark West Texas Intermediate crude closed at $93.09 a barrel Friday, finishing the week up 2.5%.

"The celebration is over," says Patrick DeHaan, senior energy analyst at gasbuddy.com, which operates 250 North American price-tracking websites. DeHaan expects prices to rise an additional 35 cents a gallon through early April before peaking at about $3.95 a gallon. That's on par with the 2012 peak of $3.94 but below the record of $4.11 in 2008.

Even so, DeHaan and auto club AAA expect 2013 gasoline to average less than $3.60 a gallon, ending a string of record-high averages since 2008. Last year, the average price of gas was $3.61 a gallon, up from $3.52 in 2011.

Despite decreasing demand, last year's prices were affected by global oil prices and limited refinery capacity. Refinery shutdowns and reduced production in California, Washington and Illinois caused regional and national wholesale prices to surge before seasonal demand slumped in the fall. Pump prices fell nearly 15% from Sept. 14 to Dec. 22, according to AAA, on falling demand and higher inventories.

DeHaan expects less volatility and smaller price increases in the Midwest and on the West Coast, but refinery troubles could again plague the market.

"Americans think there should be this magic formula based on oil supplies, but refineries are the big wildcard," he says. "And even with higher energy production, increased fuel efficiency and lower consumption, we still may face rising gas prices."

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