Gas prices could rise near $4 mark next spring

If high gas prices are getting you down, you shouldn’t be looking forward to the New Year.

An expiring ethanol tax credit will likely boost gasoline prices at the pump by a nickel on New Year’s Day, and gasoline prices could rise above the $4-per-gallon mark by spring, said Tom Kloza, chief analyst for Oil Price Information Service.

Gasoline at $4 per gallon “is a certainty for a number of states unless we have a financial collapse in Europe or a recession in the U.S.,” Kloza predicted.

Kloza, who monitors gasoline prices nationwide, said prices could rise to the $3.75- to $4.50-per-gallon range built on unseasonably high gasoline prices this year. While $4.50 per gallon is unlikely, Kloza said it is the most “apocalyptic view” of gasoline prices.

Texas gas prices have been steadily falling after peaking near the $4-per-gallon mark this summer. As of this week, Houston drivers are paying on average $3.09 a gallon, more than 30 cents higher than the $2.78 average last year, according to the AAA gas gauge report.

But Kloza said consumers actually should be paying more at the pump, given the current cost of crude oil, which is hovering around $100 per barrel.

“Based on where crude oil prices are, gasoline prices are way too cheap,” Kloza said. “The public is going to believe it, but it’s true.”

Under current crude oil prices, gasoline should be selling around $3.45 a gallon in Texas, Kloza said. He said the price has been tempered by over production by refineries, but the price will eventually correct itself in the New Year.

Bob Van der Valk, a fuel specialist, said all things point to $4 gas this spring.

“We will be starting the New Year with the average price for gasoline $1 per gallon higher than we were at the beginning of this year,” he said. “I am forecasting gasoline prices in Houston to back over $4 per gallon by Easter.”

Gasoline demand has steadily fallen since the summer, and analysts are predicting that will continue in the New Year.

“I think anyone that watches this product – and hears the talk about consumers shopping, or going back to restaurants – has to wonder if they are doing so on foot or carpooling,” Kloza said. “These are very significant year-to-year declines. There is certainly some fatigue there.”

As demand continues to shrink, American refineries have been beefing up their exports of gasoline, diesel and other petroleum products to foreign markets, turning the country into a net exporter of fuel.

The result is that drivers are paying more for gasoline for this time of the year.

“Instead of that product backing up and depressing prices, it’s being sent to other countries,” Kloza said. “It’s good news for the refining industries and their workers and the balance of trade and U.S. jobs.”