According to the U.S. Department of Energy’s Short-Term Energy Outlook for 2011 and 2012 that was recently released, gasoline prices are expected to average $3.17 per gallon in 2011 and $3.29 in 2012.
The increase in prices is partly due to the increase in crude oil prices. The DOE predicts that crude oil will cost roughly $93 per barrel throughout 2011 ($14 higher than in 2010). This price is also expected to increase to $99 per barrel in 2012.
The DOE also said that another reason for the price hike is the expected global oil usage, which is forecasted to increase by 1.5 million barrels per day through the end of 2012. The prediction of $3.17 per gallon of gasoline is about 39 cents higher than last year’s average.
But the average gas price on the west coast is expected to be 25 cents higher than the national average. It will be even worse during the peak driving season this year, as it’s likely that gas prices will go up to as high as $3.50 or even $4.00 per gallon nationwide. Notably, the DOE says “there are many significant uncertainties” that affect oil prices.
There may be a sudden surge in prices if OPEC fails to raise production as demand recovers. The DOE also considers the rate of economic recovery and growth to be a factor, especially as it is related to China’s efforts to address growth and keep inflation in check.
Compared to predictions from other oil industry analysts’ and executives, the report from the DOE sounds highly optimistic. John Hofmeister, a former president of Shell Oil, said that gas prices are expected to hit $5.00 per gallon by 2012.