, Derry, New Hampshire

January 2, 2014

Experts forecast lower gas prices

Derry News

---- — offers a fuel price outlook for 2014.

In a word, it will be volatile. There will be wide price variations, but the year should end with lower national average prices.

U.S. gasoline prices will indeed see huge swings and regional volatility in 2014, but GasBuddy analysis suggests that when all the final figures are calculated, the average price next year will fall by about 10 cents a gallon from 2013 numbers.

That would push the yearlong average below $3.40 gal for the first time since 2010 when motor fuel averaged $2.78 gal for the year. The usual upside risks will still be present (U.S. refinery maintenance, storm threats, disruption in the Middle East and North Africa), but 2014 projects to be a year that will find more consistent downward pressure on U.S. prices than in any year since the Great Recession.

Retail gasoline prices will peak at $3.83 gallon this spring, barring an unforeseen price spike.

U.S. crude production has advanced to its highest level since 1989, and imports of all foreign crude look to continue to drift lower. U.S. crude imports in late 2013 were as much as 4 million barrels per day below some of the levels witnessed in 2010.

North American production increases in recent years have more than made up for the loss of Libyan crude. Crude oil costs never saw a super-spike in 2013. The United States has heavy layers of insulation that should protect it from price spikes that could impact other continents.

It was not uncommon to find a dollar’s worth of difference between street prices in different states throughout all of 2013, and that state-by-state diversity will continue and even broaden in 2014. Many of the differences are attributable to tax treatment, but incredibly variable crude costs and wholesale gasoline prices accentuate the diversity.

Hawaii stands alone as the single U.S. state that moves according to specific global metrics, and it is the only state where GasBuddy projects a $4 gal or higher 2014 average.

While 2014 should deliver a more temperate gasoline price background than 2011, 2012, and 2013, GasBuddy analysts see the potential for dramatic price spikes and equally dramatic price plunges.

California, for example, will spend some time near the end of the first quarter above $4 gal. The interior of the country should largely have the greatest insulation against super-spikes.

The likelihood of a late first quarter 2014 rally in prices from winter lows remains quite high. Factors that contribute to a seasonal gasoline rally haven’t changed. February through April tends to see plenty of refinery maintenance ahead of the so-called driving season.

The Northeast is a bit of a new hot spot. There is less North Atlantic refining than in previous years, and imports of gasoline continue to tail off thanks to poor economics in Europe and elsewhere. Super-storm Sandy gave a preview of the region’s vulnerability, and northeastern states now tend to be in the highest quintile of motor fuel pricing.

The Pacific Northwest, on the other hand, is a beneficiary of the U.S. shale boom. Oregon prices for gasoline dipped below $3 a gallon late in 2013 and together with Washington, this geography may fare better than other regions.

The Gulf Coast and portions of the U.S. Southeast represent a mixed bag. Gulf Coast states from Texas through Virginia should see world class refineries supply some of the cheapest wholesale gasoline in the world.

GasBuddy analysts said they would not be surprised to see interior counties in the Carolinas, Georgia, and Virginia feature prices that are 10 cents a gallon lower than coastal areas.

The final numbers for U.S. gasoline consumption won’t be delivered by the Energy Information Administration until February, but 2013 may indeed have seen a small rise in demand, which would be the first annual increase since the peak demand year of 2007. For perspective, gasoline demand averaged 390 million gallons per day in 2007, compared to 365 million gallons in 2012.

Gasoline demand may continue to be extraordinarily lumpy, according to GasBuddy. However, a major increase in consumption is improbable in 2014. Demand faces considerable headwinds. U.S. drivers are aging and the fastest growing demographic group includes those over the age of 55, and represents people who will drive less and less.

It is clear that 2014 will continue to see gasoline reign as king of the transportation fuels. But watch for diesel to make some more inroads in mid-decade years. Research confirms as many as 40 new light-duty diesel-fueled vehicles will be introduced between now and the end of 2015. Despite higher street prices, diesel could see its market share of light duty vehicles increase to 3 or 4 percent in relatively short order.