Energy Prices Forecast

Economic Forecasts

Relief at the Pump Probably Short-lived

Kiplinger's latest forecast on the direction of energy prices

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GDP 2.6% growth in '19 More »
Jobs Job gains near 180,000 per month in '19 More »
Interest rates 10-year T-notes at 2.8% by end ’19 More »
Inflation Up 2.2% in ’19 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $60 to $65 per barrel in August More »
Housing 5.35 million existing-home sales in ’19, up 0.2% More »
Retail sales Growing 3.7% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

Gasoline prices are off a tiny bit. But keep your eye on tensions in the Middle East and other oil-producing regions, as oil traders are.

The national average price of regular unleaded gasoline slipped a penny this week, putting it at $2.85 per gallon. That’s not much of a drop, but considering that prices had been rising for most of the year, drivers won’t complain. For now, we look for gas prices to stay close to their current level, unless crude oil prices soar in response to a geopolitical event (a real possibility). Diesel, now averaging $3.10 per gallon, is holding steady and probably won’t move much.

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It’s hard to know which way crude oil prices will move next. Rising tensions between the United States and Iran, plus Washington’s sanctions on Tehran’s oil exports, have led to fears of a conflict in the most oil-rich part of the world. Reported attacks on oil tankers in the Persian Gulf and on a pipeline in Saudi Arabia have made the market jittery. Saudi Arabia is one of the world’s top oil producers, and much of the globe’s crude oil passes through the constricted waters of the Gulf. Any disruption to production or shipping would cause a significant price spike. At the same time, Venezuela’s production continues to drop as its economy implodes, and renewed fighting in war-torn Libya could jeopardize that country’s output, too.

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Barring a major loss of production somewhere in the world, we expect benchmark U.S. crude oil to keep trading from $60 to $65 per barrel this summer. If a crisis develops, crude would quickly shoot higher, and gasoline prices would follow.

Luckily for natural gas customers, the worries buffeting the oil market don’t apply to gas. The benchmark gas futures contract continues to trade at depressed levels near $2.70 per million British thermal units. A protracted heat wave could fire up gas prices by causing demand for electricity to jump. The United States generates more of its electricity than ever from natural gas–fired power plants, so when hot weather hits and air conditioners run hard, gas demand jumps. But if the summer proves less than scorching, it’s unlikely gas prices will rise much.

Source: Department of Energy, Price Statistics