Tuesday, August 07, 2007

Gas Price Forcast

It is time for my annual forecast of gas prices for the next fiscal year. This is not meant to be anywhere nearly accurate enough to help anyone invest in commodities markets. It is really meant to (and is a reaction to the failure of) allow people and organisations to figure into their budget, the right amount for gas expenditures for the next year.

Bottom line right here on top:
Expect to be paying $2.65 this fall
and expect prices to spike
to $3.46 next April and May.

Gas varies seasonally, and right now it is running high, but slowly declining as it does every summer. It will spike upwards if any hurricanes travel through the Gulf of Mexico (higher costs and risks involved). It will drop further in the fall, usually near the end of September, but sometimes the drop isn't seen until November. It will begin to rise again next February, and will spike upwards around the end of April.

These seasonal changes reflect mostly our driving habits, but also reflect the increased cost for summer blends required to beat the evaporation that otherwise would take place as summer heats up.

My formula for next April May price spike is as follows:
Take the predominant price of crude oil in July, (that was $74, I think) divide by 25 (giving $2.96) and add $.50 to account for the taxes.
Therefore my forecast for next May is $3.46

The last factor will vary widely by location, as taxes and EPA regulations add more in many locations. The table below only gives a partial picture, I add an extra $.10 to the tax listed in that table in areas where transportation is easy and EPA regulations don't aggravate. In "LA", Chicago, Deming or Las Vegas New Mexico, and some other parts, add extra.
Gasoline Tax Statistics by State 2002

A different method is to look at the price you were paying in May this year. Subtract $2.60 from it and use the remainder instead of the $.50 in the figures above.

1 comment:

Anonymous said...

Just a note, that I forgot to factor in the ever weakening dollar in this forcast. Gas prices went about 35 cents (10%)higher in November than I expected.
In April, I suspect they will be about 7% or 8% higher than my forcast, or about $3.70