Gas prices have been going up, up, and up in recent months. In parts of some states, people are paying well over $4.50 per gallon, with one town in California even crossing the $7 threshold. The grossly inflated prices have been largely fueled by supply chain logjams and a lag in production due to restrictions put in place as a result of the pandemic. There is seemingly no end in sight to the soaring gas prices, even though some experts have predicted relief is on the horizon. However, new information, as reported by CNN, suggests that not only will gas prices continue to go up, but by next year the national average of what people are paying out at the pump could reach $5 per gallon.
This new information comes out of a market analysis done by JPMorgan. Experts at JPMorgan alerted their clients that from the information they are seeing, barrel prices for crude oil will not only continue to rise but will likely more than double. At present, the price per barrel is currently sitting just over $70, but if JPMorgan’s analysis is correct, crude oil is primed to reach $150 per barrel, which would equate to gas prices reaching $5 per gallon at the station. Christyan Malek, JPMorgan’s head of oil and gas research, said that this can largely be attributed to a lack of manpower.
Malek explained that the pandemic not only caused production to almost cease completely for months but that sustaining labor shortages and the fact that overseas markets are still seeing substantial surges in coronavirus cases means that even if there is oil to be had in the ground, there is simply not enough people working to siphon it. This, in turn, equates to an utter lack of supply. Then, throw in the sustaining bottlenecks at the ports and what you get is the perfect recipe for disaster. It’s the perfect storm for gas prices to explode. Malek put it simply, “When we’re in a scenario where the market goes, ‘We don’t have spare capacity,’ that’s where you see overshoots.”
However, while this prediction of incurring outrageously high gas prices seems ominous, not all hope is lost. JPMorgan analysts, in their report to investors, highlighted that while topping out at $150 a barrel is a viable probability, that it is one that will not last over a long duration. Instead, what the report suggested was that the average barrel price will likely hover between $82-$88 over the course of 2022 and 2023. This is still not ideal, but it’s also not an exorbitant $150 either.
Additionally, if history is any indication, the price per barrel and cost of gas at the pump might never reach the levels being projected by JPMorgan. Tom Kloza, the president of the Oil Price Information Service, noted that during the 2008 recession some investors were predicting that the price per barrel would reach $200 which would have meant gas prices would have been about $6.67 per gallon. In reality, however, at that time barrel prices never exceeded $145 each.
Ultimately, only the coming months and years will reveal whether or not gas prices really will reach a national average of $5 per gallon. In the meantime, however, drivers can enjoy a slight decrease, albeit temporary, in what they are paying out at the pump that resulted from initial concerns related to the new COVID-Omnicron variant.