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How High Can It Fly?


There are days when predicting energy prices here at GasBuddy can be a real challenge. At the beginning of the year and contrary to conventional wisdom, we predicted in our 2018 Fuel Outlook that this year’s prices at the pumps would be the most expensive since 2014. Fast forward 4 months and the dramatic increases seen at the pumps is not only a given, but now many assume they have much more room to increase.

Motorists can absorb big gas price increases provided they occur gradually over an extended period of time, but the now 58 cents a gallon surge since last year and 45 cents of that increase in the last few months, has many wondering if the sudden spike in fuel prices might cause a chill in demand, setting the stage for a correction in prices. After all, assuming annual average consumption at about 650 gallons a year, the increase this year represents a $350 additional cost to drive.

However, world demand for refined products is considerably higher than in the past, and what domestic production isn’t being used by North American consumers is now increasingly being shipped off to other regions of the world, most notably Mexico and Latin America. Little wonder that a growing number of energy experts are targetting higher oil prices for the next few years. Some suggest that $85 Brent oil isn’t far away and that $100 a barrel could be attained sometime in 2019. Fuels such as diesel and gasoline too are prized exports with diesel likely to rise more dramatically as the world’s marine fleet shifts to cleaner diesel from more sulfur-laden bunker oil under the so-called IMO 2020 regulations.

OPEC and its new-found allies, like Russia, don’t appear to be in too much of a hurry to raise oil production quotas so that, even with U.S. shale output up a million barrels a day since last year, the increase won’t match the expected 1.5 to 2 million barrel net global demand increase. Sanctions against a million barrels of Iranian oil, a collapsing Venezuelan oil outlook, and years of reduced capital expenditures in future oil development is now coming to provide more long-term support to the crude and petroleum commodities complex. Together, it paints a picture of sustained and increasing energy prices driven by geopolitics, fundamentals, and growing economic optimism at the end of a long growth cycle.

With summer driving season beginning this week in Canada and next week in the U.S., concerns over skyrocketing energy prices may just be a glimpse into realities that have almost been forgotten since those more costly days in 2014.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.