This is normally the time of the year that gas prices fall to their low point.
Not this year.
Gas prices are now close to their highest point since the pandemic prompted stay-at-home orders in March. The average price of a gallon of regular gas stood at $2.25 on Thursday, according to AAA, off only a penny from the nine-month highs reached last weekend but up 13 cents from a month ago.
Typically, December and January have among the lowest gasoline consumption of the year as short daylight hours and bad weather discourage people from driving. And that suppresses gasoline prices in the winter. But recent approvals of Covid vaccines have raised hopes for a return to more normal travel and economic activity in the year ahead, driving up oil and gasoline futures.
“There’s tremendous confidence in the markets that at some point in 2021 that demand will rebound,” said Tom Kloza, chief oil market analyst for the Oil Price Information Service, which tracks gas prices at 140,000 US stations for AAA.
Low prices for gasoline, and especially jet fuel, earlier in the year also prompted refiners to cut North American refining capacity by about 1.2 million barrels a day. That capacity cut also helped to lift average gasoline prices.
The low point for gas prices this year came in late April, when prices bottomed out at $1.77 a gallon, as widespread stay-at-home orders designed to battle the pandemic caused a collapse in oil prices. Crude prices briefly turned negative in April in the face of that plunge in demand. The national average gasoline price did not climb back above $2 a gallon until early June and has been slowly climbing since then.
The average price is still down 13% from the $2.53-a-gallon average
of a year ago. But then the prices were going down, not up.
The $267 billion that drivers spent on gasoline this year was the lowest amount since 2004, and about $100 billion less than in 2019. And the $2.18 average price for the year is the lowest since 2016, and the second lowest full-year average over the last 16 years.
Even with the recent run-up in the average price, a bit more than a quarter of gas stations nationwide are selling gas for less than $2 a gallon.
Kloza believes the markets might be getting a bit ahead of where demand will be in 2021. He believes the shift of more people working from home and increased use of electric vehicles means that US oil consumption will never again reach the average of 9.3 million barrels it reached from 2016 through 2019.