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The national average price of regular unleaded is off its peak from earlier this spring of about $4.50 per gallon. Today, the national average stands at $4.22. Drivers are not complaining about the decrease. But the national average remains more than $1 per gallon higher than at this time a year ago. In general, prices starting with a 4 tend to feel high for American consumers, and often lead them to cut back their spending on other goods or services, since it’s difficult to drive less on short notice. We expect gas prices to keep easing, and perhaps slip a bit below the $4 threshold this summer, but probably not by much. And if oil prices start climbing again due to continuing disruptions to exports in the Middle East, gas could quickly shoot up again. Diesel, now averaging $5.38 per gallon, is also coming down, but like gas, remains well above last year’s prices.
Benchmark West Texas Intermediate crude oil is trading near $90 per barrel, after spiking above $100 earlier this spring due to the war with Iran and the related blockage of shipping in and out of the Persian Gulf. Much of the region’s enormous oil output is bottled up in the Gulf as Iran tries to control shipping through the narrow Strait of Hormuz, and the U.S. Navy in turn blockades Iran’s ports. Any new hope for a peace deal to resolve the situation would cause oil prices to drop. But so far, claims that a deal was near have fallen apart, keeping oil traders on edge. We look for WTI to trade near $90 per barrel if the current stalemate continues. Later in the summer, oil could rally again if reserves of stored oil around the world run too low and raise fears of shortages before the Persian Gulf reopens to normal shipping.
Natural gas prices have been ticking up as summer heat intensifies in the U.S. Benchmark gas futures contracts recently traded near $3.30 per million British thermal units, about 10% above their earlier trading range. Warming weather across much of the country means more demand for electricity to keep air conditioners running. And gas is the top fuel for generating power in the United States. We look for gas futures prices to trade in a volatile pattern, dropping to $3 per MMBtu if weather forecasts show lower temperatures returning, or approaching $4 per MMBtu if a major heat wave looms.
