Photo: @DrEliDavid via Twitter
Although gas prices have fallen below $3.90 a gallon in the past week, the problem is not behind us. Analysts warn that the price will soon find a floor before spiking later this year. The new price spike might be the worst yet.
Fuel prices at the pump skyrocketed in June and July, with premium fuels costing as much as $9.80 a gallon in some parts of the country. With the oil prices starting to fall in the light of a slower-than-expected Chinese economy, the fuel prices were pushed downwards to the relief of the average American. The situation will not last, warn Bank of America strategists, and the fuel prices will spike again toward the end of the year.
The same motives that caused the price hikes in the summer will fuel the next rally in winter. Analysts predict that an increased fuel demand caused by cold weather will overlap with falling global supplies. This will stop the falling trend and cause gas prices to soar in the fourth quarter of 2022.
“Gasoline prices should soon find a floor,” a commodity and derivatives team led by Francisco Blach wrote in a recent note seen by Business Insider. ”Summer dynamics may not repeat themselves exactly into year-end, but they could rhyme.”
According to the Bank of America analysts, demand for gas has remained inelastic, which means that people were not convinced to drive less. Instead, they continued to fill their tanks regardless of the price. The analysis estimates that the demand could expand by about 350,000 barrels a day or 4% in the fourth quarter of 2022. This suggests that prices will spike if there’s any gas supply disruption or if crude oil prices rally toward the end of the year.
The latter is all but guaranteed, as Bank of America already forecasts that Brent crude oil will climb another 2.7% to trade at $100 a barrel by the start of the fourth quarter. The WTI crude oil will also jump 4% to $95 a barrel.
The same motives that caused the price hikes in the summer will fuel the next rally in winter. Analysts predict that an increased fuel demand caused by cold weather will overlap with falling global supplies. This will stop the falling trend and cause gas prices to soar in the fourth quarter of 2022.
“Gasoline prices should soon find a floor,” a commodity and derivatives team led by Francisco Blach wrote in a recent note seen by Business Insider. ”Summer dynamics may not repeat themselves exactly into year-end, but they could rhyme.”
According to the Bank of America analysts, demand for gas has remained inelastic, which means that people were not convinced to drive less. Instead, they continued to fill their tanks regardless of the price. The analysis estimates that the demand could expand by about 350,000 barrels a day or 4% in the fourth quarter of 2022. This suggests that prices will spike if there’s any gas supply disruption or if crude oil prices rally toward the end of the year.
The latter is all but guaranteed, as Bank of America already forecasts that Brent crude oil will climb another 2.7% to trade at $100 a barrel by the start of the fourth quarter. The WTI crude oil will also jump 4% to $95 a barrel.
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