Should you be panicking about the rising gas prices? (+video)(Read article summary)
After falling for 123 days, gas prices are on the rise again. What does the future of gas prices likely look like?
Gas prices have been falling steadily for almost four months now, but the trend is beginning to turn around – to the despair of the many Americans who were getting accustomed to saving at the pumps.
According to AAA’s daily Fuel Gauge Report, the national average hit its lowest point on Jan. 26 at $2.03 per gallon and has been climbing ever since. By Feb. 5, the average was $2.15 for a gallon of gas, up four cents from the day before.
Some areas have seen a much more dramatic shift. Bay City, Mich. experienced a 29-cent spike in gas prices overnight, and Cincinnati and Columbus, Ohio saw a 22-cent spike in the same timeframe, according to GasBuddy.
“We are going to see increases in the next 90 days and I wouldn’t be surprised to see prices considerably higher by April but nothing like what we have seen in the last four years,” Tom Kloza, the global head of energy analysis at Oil Price Information Service told CBS News.
So why is this happening? Well, there are a number of factors at play here.
Gas prices generally rise at this time of year when refineries switch from making winter gasoline, which is cheaper and contains more butane, to the more expensive and pure fuel used in the summer. During the switch, refineries also shut down select units for inspection and repairs.
Both factors together send gas prices up, typically by 30-50 cents, according to AAA.
The fact that crude oil is no longer in economic free-fall like it has been for the last few months, means that oil companies can charge higher prices for oil. Kloza suggested that oil companies may have originally overreacted to the drop in the price of crude oil and pushed gas prices down farther than necessary.
Unsurprisingly, gas prices tend to move more quickly on the way up than on the way down, according to Roger McKnight, senior petroleum adviser at En-Pro International, but Kloza is optimistic.
“If we see a normal trajectory of prices we might see average retail prices between $2.30 and $2.60,” said Kloza. “To put that in perspective, that is lower than the lows we saw in 2011 through the first half of last year. So it is a dollar below where we go to last year.”
And prices will likely continue to stay low.
“I think the oil glut is still here for a while,” said Kloza. “I wouldn’t be surprised to see prices below two dollars disappear shortly but come back, maybe even in time for the [summer].”