Just as concerns about the omicron variant helped reverse rising gas prices — a bit — in December, now the growing sense that infection rates have peaked is pushing prices back up.
But this time, some analysts are projecting that oil prices will hit $100 a barrel and gas prices will climb to $4 a gallon.
We’re not there yet. On Thursday, the average price in Washington was $3.95, nationally the average price was $3.32, up about a two pennies compared to the previous week but down compared to $3.41 on Nov. 23.
Patrick De Haan, head of petroleum analysis for price-comparison website GasBuddy.com, says we’re in the “calm before the storm.”
If U.S. infection rates continue to fall, consumers will take to the roads as they normally do this spring and send prices sharply higher as oil and gas production fail to keep pace with increased demand, he said.
The price increases will likely start as early as March — a peak time for tourism — and rise as much as 25 cents a gallon through May, De Haan said.
U.S. crude oil prices, which fell from $84 to $66 a barrel after omicron began surging across the globe, are now back close to $85 a barrel, he said.
Financial analysts are sounding similar alarms. Wall Street bank Goldman Sachs on Monday told clients that it expects crude prices to hit $100 a barrel in the third quarter of the year, according to CNN.com.
One reason, according to the bank, is that shale oil producers are unlikely to invest in increased capacity amid the transition, led by President Joe Biden and Democratic Party allies, from an economy based on fossil fuels to one based on renewable energy.
On top of that, political unrest in Kazakhstan and the ongoing threat that Russia will invade Ukraine have traders expecting oil production to remain tight and prices to remain high, De Haan said. Both Russia and Kazakhstan are members of the so-called OPEC+ bloc, which consists of 24 members of the Organization of Petroleum Exporting Countries plus 10 other oil producing nations.
“The market is certainly very anxious that something will develop [in Ukraine],” De Haan said. “Instability in major oil-producing nations is very concerning.”
In its weekly gas price update, AAA projected another round of rising prices amid failures by various members OPEC to meet production goals.
Tom Kloza, global head of energy analysis for the Oil Price Information Service, which provides information to oil investors, said other factors will contribute to the upcoming price spikes, including loss of refinery capacity, as several U.S. and Canadian refineries have been permanently shut down in recent months, a reluctance by distributors to expand storage capacity to meet peak summer demand, and the fact that consumers haven’t changed their consumption habits amid last year’s rise in gasoline prices.
Kloza said he expects $100-a- barrel oil and $4-a-gallon gasoline won’t last long. “I don’t think this is a new normal,” he said Tuesday. “It’s kind of like a sneak preview of another Star Wars movie.”
Ultimately, he said, prices will remain high as the transition to renewable energy takes hold. “It’s going to be painful and costly,” he said. “Someone has to be honest with the public and say there’s no such thing as a free lunch.”
Still, not every analyst expects $100-a-barrel oil and $4-a-gallon gas.
The U.S. Energy Information Institute, which tracks energy prices and consumption for the federal government, predicted in its most recent Short Term Energy Outlook on Jan. 11 that gas and oil prices would actually decrease over the next two years.
While the EIA doesn’t see gas prices falling back below $2.50, it expects increased global production to keep gas prices at an average $3.06 a gallon in 2022 and $2.81 in 2023.
Still, De Haan noted that the $3.06 projection for 2022 was revised upward from the administration’s previous projection in December, when it said gas prices would average $2.88 this year.
Kloza said the EIA typically does not project large price swings.
“The EIA is very temperate,” he said. “They don’t panic and they don’t have an agenda but they tend to be a bit conservative [about prices] on the way up, and on the way down.”