ASSOCIATIONINSIGHT
Portable Sanitation Association International News
BIWEEKLY EDITION MARCH 31, 2021
Page 13
Fuel Prices: What to Expect Ahead…continued from page 12
Continued on page 14
• Cancellation of the Keystone pipeline project. The pipeline
was not yet operational, so revoking the permit changed
nothing in the supply chain. In addition, most of the oil that
would have been carried by the pipeline was destined for
export, so it would not have impacted US gas prices much.
• Any individual, including politicians or business leaders.
As mentioned earlier, the impact politicians have on fuel
prices is gradual and is reflective of broad policy changes,
not short-term circumstances. The markets often react—and
over-react—when certain people speak (think of the impact
of some of former President Trump's tweets or the occasional
remark from Elon Musk). These events, however, typically
cause just a brief price blip, if even that. Decades of data shows that price blips usually disappear shortly. Look
for lawmakers' actions to affect the longer term outlook.
What to Expect in 2021
The EIA has not yet published its annual Summer Fuels Outlook report, but its March 9, 2021 Short-Term Energy
Outlook shows a leveling off of crude oil prices in the middle of the year and a "mostly balanced market" in 2022.
As we have noted, crude prices are a good proxy for what is likely to happen with gasoline prices as well, and so it
is likely that fuel prices will stabilize in the second half of 2021 as well.
Before that happens, though, the price of crude oil could spike at $70–$80 a barrel according to February 2021
predictions by analysts at Bank of America and Goldman Sachs. If oil prices jump that much, it will drive prices at
the pump up considerably this summer—probably in the $4.00 per gallon range for regular unleaded on average
and much higher in some areas. Diesel could top out around $4.60 in that scenario.
Other sources, whose predictions are slightly more recent, are less inflated in their estimates. Fitch Ratings
assumes crude prices will be around $58 per barrel and will level off in the second half of the year. The Wall Street
Journal (link has a paywall) sees balancing market forces holding back the worst possibilities. They note US oil
producers will try to restrain domestic production to keep prices up, but they will not allow foreign competitors to
gain market share. Meanwhile, pent up demand from COVID-fatigued consumers will push gas demand up over
the summer, but consumers will eventually balk if gas prices get too high.
So what does this mean? Information from a
variety of sources suggest that fuel prices will
average between $3.00 and $4.00 a gallon for
regular unleaded through the summer of 2021.
This means diesel fuel, which runs about 15
percent above unleaded, could average between
$3.45 and $4.60 per gallon. We last saw levels like
these in 2008 as shown on page 2.
Assuming there are no further game-changers like
an international incident that stops the flow of oil
(the recent Suez Canal incident), a major hurricane
that knocks out US coastal production for an
extended period, or another pandemic, most
experts believe market supply and demand forces
will sort themselves out by the end of summer. Prices will then likely settle back to 2018–2019 levels later this year.
