The United States Department of Energy just released its Short-Term Energy Outlook for 2011 and 2012, and predicts that gasoline prices will average $3.17 per gallon in 2011 and $3.29 in 2012.
Part of the reason for the predicted increase in gasoline prices is due to a corresponding increase in crude oil prices. The DOE expects crude oil will cost roughly $93 per barrel throughout 2011 — $14 higher than last year — and that price will rise to $99 per barrel in 2012. Another cause for the increase in gasoline prices is the expected global oil usage, which is estimated to grow by 1.5 million barrels per day through the end of 2012.
While $3.17 per gallon of gasoline sounds expensive — that’s roughly 39 cents higher than last year’s average — the DOE predicts worse could be in store for us. If you live on the west coast, the average gas price is expected to be 25 cents higher than the national average. Peak driving season this year may be even worse, with the possibility that gas prices could rise as high as $3.50 or even $4.00 per gallon nationwide.
It should be noted, however, that the DOE says “there are many significant uncertainties that could push oil prices higher or lower than expected.” One factor is OPEC and its oil production schedule. If it doesn’t increase production as demand recovers, oil prices could sky-rocket. Another significant factor is the rate of economic recovery and growth, particularly concerning China’s efforts to address growth and keep inflation in check.
The DOE’s report does sound more appealing than other oil industry analysts’ and executives’ predictions. John Hofmeister, a former president of Shell Oil, believes gas prices will reach $5.00 per gallon by 2012. Whether or not there will be the kind of growth in global demand that Hofmeister predicts has yet to be seen, but don’t be surprised to see gas prices starting with a five by decade’s end.
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Source: U.S. Department of Energy