Yahoo Finance Gas prices: ‘The solution here, unfortunately, is probably a recession,’ analyst says
Gasoline prices remain above an average of $5/gallon nationally, according to AAA data, and energy experts still do not see any relief in sight.
"We’re likely to get record highs on U.S. regular gasoline this summer, when demand typically peaks,” Stewart Glickman, energy equity analyst at CFRA Research, told Yahoo Finance. “Best guess, we peak around $5.50/gallon during the summer.”
Citing refining capacity, he added: “If we’re going to get US gasoline prices to fall, it’s probably not going to be a supply-driven solution. The solution here, unfortunately, is probably a recession that kills demand and reduces scarcity of supply."
Consumers are already showing the first signs of slipping demand and may be wondering how much more they can handle as essentials like groceries also rise amid elevated inflation.
“I think gasoline prices will remain elevated throughout summer" — meaning the $5.00-$5.50 range — "based on strong demand during summer driving season in the US, low inventories, and refining constraints,” Rebecca Babin, senior equity trader for CIBC Private Wealth, told Yahoo Finance.
“I don’t think prices will rise sustainably above $6 per gallon due to demand destruction,” she added. “Additionally, Kuwait’s Al-Zour refinery is scheduled to come online over the next month which should help ease some of the refining bottle necks that are currently impacting gasoline prices.”
In the short term, one oil analyst believes gas prices could actually come down.
“We may see the national average slip to less than $5 [per gallon] in coming days," Tom Kloza, global head of energy analysis at OPIS, told Yahoo Finance. "The market is seeing some demand destruction and it may be that July will be the only month where driving is anywhere close to normal. Don't be surprised to see some slippage in prices this week."
Kloza agreed with other experts that the price of crude, weather conditions, and refining capacity will have a lot to do with gasoline costs for consumers.
“Where gas prices go in July and August is anybody's guess and it will depend on whether refiners survive those months where hurricanes can really impact supply," he said. "There is also the threat of power outages tied to the electric grids in a number of states, particularly Texas."
21 states currently carry a national average of more than $5/gallon at the pump, according to AAA data, and California leads the nation with an average of $6.43 for a gallon of regular gas.
Kloza noted the pain will be somewhat uneven while also being felt everywhere to some extent.
“Some regions of the country could see prices of $6 [per gallon] or more in the summer," he said, "but it's not likely that states except California see prices approach $7."
Ines is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
