Gas Prices 2022: What Experts Predict for the Rest of the Year
Gas prices are a complex issue. While most people only see the large numbers displayed on the signs outside the gas station, the issue is multi-faceted. There are economic factors both domestically and abroad, as well as geopolitics to consider.
The world has been through some trying times, beginning in early 2020 when COVID-19 took hold and extending well into 2022 with Russia’s invasion of Ukraine. These unprecedented developments have had a significant impact on gas prices, yet they aren’t even the only forces at play.
Given the complexity of this issue, it is no small task to forecast gas prices for the rest of 2022. Nevertheless, experts have offered their insight into what we can expect for the rest of the year.
Gas Price Trends
Gas prices were relatively flat for much of the 21st century so far. For instance, U.S. Energy Information Administration (EIA) data shows an average gas price of $2.903 in September 2005. In May 2019, the price was about $2.86. The price actually declined nationally until April 2020, when it was $1.89.
This point marked the beginning of a sharp increase. By April 2021, the price was $2.858. By April 2022, it had skyrocketed, to $4.109. The most recently-available monthly number is even more unprecedented — $4.929. For context, the biggest spike in average prices, before the recent increase, was in July 2008, when prices reached $4.062.
However, other data is showing signs of relief. AAA Gas Prices show a current national average of $4.655 (as of July 12). However, the week-ago average was $4.812, and the month-ago average was $4.986. Thus, while prices are still high, we are witnessing clear signs of relief at the pump.
Why Gas Prices Have Risen so Much
The recent rise in gas prices has been the result of a combination of factors unique to the state of the world today. We’ll take a look at a few of those factors, including increased demand, Russia’s invasion of Ukraine, and lack of supply.
Russia’s invasion of Ukraine officially began in February 2022 and has shaken the world to its core. Aside from the cost in human lives, the economic impact has also been huge.
Countries took swift action against Russia, including the U.S., which banned imports of Russian oil.
“Even though the United States only imported about 8% of its oil from Russia before sanctions took effect, gas prices have risen dramatically because Russia is the world’s third-largest producer of oil and gas,” says Chase Gardner, a researcher at Insurify, an insurance quotes comparison site.
Russia’s status as the third-largest oil producer matters because this gives it a significant impact on oil prices. These prices are not set domestically, but globally. Thus, ceasing imports from one of the world’s largest suppliers causes supply problems, pushing prices upward.
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The story we’ve heard for quite some time is that overall demand for goods and services is skyrocketing in a post-COVID world. To be clear, COVID is not over — new variants are still emerging, such as the newest, highly transmissible Omicron subvariant BA.5.
Nevertheless, while COVID persists, it’s true that demand has increased dramatically. For example, Deloitte’s most likely scenario in its U.S. Economic Forecast Q2 2022 shows consumers continuing to spending on pent-up demand for services such as entertainment and travel. Gas is certainly a part of this — people use more gas as they travel, attend events and enjoy the arts.
Increased spending is apparent when we consider inflation, which reached 8.6% in May 2022 — its highest level since 1981. That month, gas prices increased by a more modest 4.1%, according to a report from the BLS. But fuel oil increased 16.9% that month, and in March 2022, gas prices increased by 18.3%.
Gas prices declined in April 2022, dropping by 6.1%. Hence, recent months have shown us a slight reprieve at the pump, but will that continue? Experts are less optimistic than most of us would prefer.
Will Gas Prices Keep Going Up?
Gas prices have been down in the past two months, and that has some Americans feeling good about the future. One eye-catching stat from AAA is that about 80% of gas stations are now selling regular gasoline for under $5.
However, experts warn that we shouldn’t expect gas prices to keep dropping through the summer. Gardner says that “prices will likely continue to rise over the coming months due to the ongoing sanctions against Russia.”
The other factor in rising prices, increased demand, is not one that is likely to subside either. The summer is when most people travel due to warmer weather and children being on vacation. This will likely result in continued upward pressure on gas prices as more people visit the pump.
While we can expect demand to subside as the summer months wind down, we don’t know how the conflict will play out in Europe. However, continuing sanctions mean supply will continue to be insufficient. Some analysts are predicting an average national gas price of at least $6 later this summer.
The future always holds some degree of uncertainty, and an unforeseen event could change these forecasts overnight. For now, though, the prevailing wisdom is that we shouldn’t expect a serious drop in gas prices for at least the next several months.
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