Tank up on fuel in off-peak periods

Rumors abound that America is headed for $5 gasoline. But aside for a few California pumps priced above a “Lincoln,” Tom Kloza, chief oil analyst with Oil Price Information Service, contends a $5 U.S. average is still a few years down the road.

If you didn’t lock in fuel prices before the Middle East uprisings, consider waiting until the turmoil and oil-price speculation settle. Kloza expects prices to continue rising through Memorial Day and into June, when gasoline pump prices normally peak. “Prices will rise, irrespective of what happens to crude oil,” he predicts.

Key Points

Unless major trouble erupts in the Middle East, $5 gas is still a ways off.

Regular gas may average $3.56 a gallon with taxes in 2011.

On-highway diesel fuel may average $2.91 this year, without taxes.

Neil Gamson, petroleum analyst for the U.S. Energy Department’s Energy Information Administration, or EIA, agrees. “Pump prices will likely rise further through spring, since recent crude-oil increases haven’t been fully passed through to gasoline prices.”

Now for EIA’s disclaimer: “There’s significant uncertainty surrounding [this] forecast. Current market prices of gasoline futures and options contracts suggest a 25% probability that the national monthly average retail price for regular gasoline could exceed $4 per gallon during summer 2011.”

Impact on your fuel bill

EIA tracks global natural gas and petroleum product reserves and predicts fuel price trends. Here’s what it projected in early March for 2011 and 2012:

Average regular-grade retail gasoline prices, with state and federal taxes, averaging 49 cents a gallon, are projected to rise from $2.78 in 2010 to $3.56 per gallon in 2011 and $3.57 per gallon in 2012.

Rising crude-oil prices are the primary reason for higher retail prices. But higher refining margins are also plugged into the projections.

On-highway retail diesel fuel (taxes included) will rise from the 2010 average of $2.99 to $3.81 per gallon in 2011, and $3.82 in 2012. State and federal taxes average 52 cents a gallon.

Residential heating oil is likely to jump from the 2010 national average of $2.97, to $3.70 per gallon in 2011 and $3.90 in 2012.

Residential natural gas will be up only slightly from 2010, with average 2011 price at $11.20 per million cubic feet, and then jump to $11.92 in 2012 as supplies begin tightening.

Best time to tank up?

Looking at EIA’s monthly price projections, gasoline prices peak by July. The best time to price gasoline may be in mid- to late fall.

Diesel fuel prices trends don’t have the same volatility. Average national on-highway retail prices tend to run highest during winter months. In 2011, for example, diesel (taxes not included) went from January’s $2.87 a gallon to April’s $3.38, then back to $3.33 for December.

In 2012, EIA projects on-highway diesel peaking at $3.35 in January, then dropping $3.23 by December. But when it comes to oil-based fuels based in these volatile markets, the best guess is still just a guess.


TANK-UP TIME? Now may be a good time to top off your gasoline tanks with cheaper gas. But diesel fuel shows less volatility, according to EIA projections.

This article published in the April, 2011 edition of AMERICAN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2011.