The price of gasoline is expected to raise $3 a gallon by the end of 2021in the U.S. due to the economic recovery from the coronavirus pandemic. According to a new report by GasBuddy, prices will average $2.44 in 2021, 27 cents higher than in 2020.
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After the pandemic: what can we expect from gas demand?
According to a new report, If the economy makes a strong recovery from the coronavirus pandemic; the price of gasoline in the U.S. could rise to $3 a gallon by the end of the year. The fuel tracking website GasBuddy predicts that prices will average $2.44 in 2021.
Particularly in Houston, prices are expected to average $2.70 a gallon by the same time period.
Patrick DeHaan, GasBuddy’s head of petroleum analysis told The Houston Chronicle their forecasts come with a 19 percent margin of error; given the pandemic’s uncertainties and the vaccine rollout.
“With the coronavirus in the driver’s seat, 2021 looks to be a very uncertain year for gas prices with a wide range of possibilities;” DeHaan said in the report. “Add in President-elect Biden and the potential for new policy adding into the equation, we could see gas prices coming into 2020 like a lamb and leaving like a lion.”
Also, the report highlights how an increase in prices could mean the average American family would spend $1,670 on gasoline this year, $53 more than in 2020, but still less than the pre-pandemic average of about $2,000.
A new normal and an oil recovery
“Americans have been salivating for life to get back to normal, and 2021may deliver on their wishes. While that may be the best possible outcome, it’s likely to also lead to higher gas prices,” DeHaan said.
Whether gas prices rise cents or dollars, this year promises to be an improvement for the oil industry, according to GasBuddy. Last year opened with a pandemic that eventually led to global lockdowns and an unprecedented drop in fuel demand.
In this regard, the average price of gas plummeted by 45 cents per gallon, the largest decline since 2015.
The pandemic is expected to weigh on gasoline demand and prices at the start of 2021, but as it eases, prices are expected to improve by half of the year. In particular, refineries have felt the financial pressure of decreased demand for gasoline, diesel, and jet fuel.
Especially, U.S. refinery capacity has fallen to 18.4 million barrels per day from 19 million at the start of 2020, the lowest in almost four years, according to the DOE.
If fuel demand rises sharply, refineries could be caught flat-footed, pushing gasoline prices up.