Gasoline Price Predictions in the Next Five Years
World events such as the conflict in Ukraine have caused price inflation worldwide — driving up the prices in every sector. One of the highest price hikes is in gasoline. Because many conventional vehicles still require it to run, gasoline price predictions in the next five years are among the most significant concerns for everyone around the world.
Current Gasoline Metrics and What They Mean
Although lowering slightly, gasoline prices remain at record highs throughout the world. The Organization of the Petroleum Exporting Countries — also known as OPEC — has announced that they will be cutting their combined crude oil exports further. This means 500,000 barrels of crude oil production will be cut from the market, driving prices up even further.
Crude oil costs 54% of a gallon of gasoline, so it is a benchmark for the price of gas and other fossil fuels. Brent Crude Oil, one of the largest suppliers of crude oil, has raised its price to $86 a barrel.
Increasing crude oil prices trickle down to the consumer as companies struggle to profit from selling gasoline. The more gasoline companies have to pay for crude oil, the higher their gasoline prices to the consumer will be.
This move by OPEC is a response to the current economic situation in the U.S. and the U.K. Record high-interest rates in Western countries have led to a financial crisis as many banks close. While this move should reduce gasoline prices in the long term, it will also cause them to rise in the short term.
Consumers will have to pay more for gas, causing them to spend less in other areas as money is going more towards purchases essential to maintaining living standards. As consumers spend less, businesses make less profit — causing stocks to fall.
Predicting Gas Prices
Forecasting the price of gas far into the future is difficult because gas prices tend to be highly volatile, especially in today’s world. Website Wallet Investor offers a solid gasoline price prediction within the next five years — $5.219 at the lowest and $5.298 at the highest. However, many worldwide factors could affect gas prices in the future.
China’s re-opening after lifting all of its COVID-19 restrictions by January 2023 is predicted to relieve the pressure from gas prices significantly. Until now, China’s energy consumption has been limited due to COVID-19 restrictions.
China’s gross domestic product growth is at 5% this year, faster than the global economic growth. The country’s need for crude oil exports will be a boon to the global oil economy.
Once the country opens its borders again, its fuel consumption is predicted to grow by 5.0%. This is due to flights to and from the country increasing in frequency as they return to the export market. Because of this, analysts are expecting strong growth returns in the crude oil market, which will help raise global fuel consumption growth for 2023.
The Conflict in Ukraine and its Effect on Crude Oil
Unsurprisingly, Russia’s invasion of Ukraine and its global consequences are a driving factor in the rising cost of crude oil. Russia is the second largest exporter of crude oil in the world. Its choice to invade Ukraine has disrupted the global economy — raising the price from $76 a barrel to $122 at the beginning of the war.
Since then, Russia has used its crude oil supply as part of its military strategy, denying countries that support Ukraine and its allies access to their oil. The U.N. E.U. and NATO have placed sanctions on Russia, including a cap of $60 on Russian crude oil.
While Russia’s policies paint a bleak future for crude oil prices, the market has been steadily recovering from its lows since the beginning of the war. Prices in the U.S. have steadily decreased since their peak in June of 2021. Once at $5.02 at the start of the conflict, prices have dropped to $3.54 one year after.
In this case, many are predicting that the price of crude oil will continue to fall. However, U.S. consumers will still pay a hefty sum at the pump even after the price has dropped. Last year, U.S. families spent an estimated average of $5,000 per year on gasoline — much more than the estimated $2,800 from 2021.
How the Renewable Energy Movement will Affect Gas Prices
The rise in gasoline prices has created greater awareness of the dependence Western nations have on fossil fuels. This new awareness, combined with the greater concern over environmental issues, has fueled a larger interest in renewable energy initiatives.
The Biden Administration recently announced it would invest $82 million to strengthen the U.S. clean energy grid. This is part of President Biden’s agenda to increase renewable energy manufacturing and curtail the country’s dependence on fossil fuels.
In addition, the U.S. has also set initiatives to increase the production of electric vehicles and E.V. infrastructure. These include having E.V. sales from significant car manufacturers increase to 50% by 2030. This is in addition to making E.V. charging stations more accessible throughout the country.
This interest in renewable energy sparks competition in the energy sector that has long been dominated by crude oil. Competition can potentially lower the price of crude oil as countries begin adopting alternative energy solutions, lowering gasoline prices.
These support gasoline price predictions in the next five years being positive. However, some analysts predict that OPEC will resist this change by adjusting prices to support crude oil.
Gasoline Price Predictions Continue to Change
Because of the state of the world, making gasoline price predictions for the next five years is very difficult. As Russia continues its aggression in Ukraine, prices will remain high at the pump. The continued interest in alternative energy solutions will likely affect crude oil prices as those investments bear fruit.