Are Gas Prices Headed Up or Down?

By: James Flippin · February 28, 2023 · Reading Time: 3 minutes

4 Conflicting Trends

Russia’s invasion of Ukraine, along with other factors such as supply chain struggles and inflation, sent domestic gas prices soaring last year. Fortunately, prices at the pump have been slowly declining for months. But whether or not this will continue depends on four global trends:

•   The Russo-Ukrainian War Recessionary fears

•   A downward trend in US refining capacity

•   The reopening of the Chinese economy

These factors are putting paradoxical pressure on gas prices. No one can seem to agree which will win out in the end.

Fill ‘Er Up

Right now, the national average price for a gallon of gas is $3.34 per gallon and the median is $3.19 per gallon. Per usual, these figures depend heavily on location. Average gas prices near $5 in California, while Texas, Mississippi, and Oklahoma see an average of less than $3 per gallon.

Meanwhile, the US is producing roughly 12.3 million barrels of crude oil each day — about 700,000 barrels more per day than last year.

Higher inventories tend to drive prices down. But for every action, there’s an opposite reaction, and experts expect OPEC will lower production to keep prices steady.

Looking Forward

While inventories are comparatively high, they remain low on an historic basis. Some industry insiders believe this means that the price of gas will rise again in the short term. However, US oil companies are rapidly expanding their refining capacity. Once these new refineries are up-and-running, it could help ease prices again.

With all of these competing forces at play, it’s hard to say exactly how it will play out. But the best hedge against volatility is to find ways to steady yourself. In this case, that means budgeting according to the worst case – $4 per gallon in the midwest and $5 along the coasts, according to one analyst – while, naturally, hoping for the best.

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