(GasBuddy) After a tumultuous year for gas prices, some relief may be on the way in 2023. The yearly national average price of gas in 2023 is forecast to drop nearly 50 cents per gallon from that of 2022 to $3.49, according to GasBuddy’s 2023 Fuel Outlook released this past Friday. Continuing improvement in refinery capacity will help alleviate gasoline and diesel prices, though high levels of uncertainty remain amidst Russia’s ongoing war on Ukraine and continuing economic concerns. A $4 national average remains possible ahead of and during the summer driving season.
Patrick De Haan, head of petroleum analysis, has his eyes on a number of factors to start the year, but he says the biggest is China.
“China has really seen a limited amount of oil consumption happening because of myriad restrictions that they have had in place, and now, depending on how the reopening goes if it’s, you know, doors wide open,” De Haan said.
And if China does go ‘doors wide open,’ De Haan said that has the potential to increase demand so much that prices in the United States could skyrocket.
“If they reopen, that could have a profound impact on global oil prices and thus gasoline prices,” De Haan said.
But China is just at the top of the list of numerous factors that impact gas prices.
“Refineries are going to be a story in the year ahead,” De Haan said.
He said even though refinery capacity is increasing, all it takes is one key refinery to make prices jump. He points to the refinery in Whiting, Indiana, that shut down in 2022 due to an electrical fire.
De Haan even said that still today, Russia’s war in Ukraine has the potential to shake up markets in the United States. However, much like a refinery shutting down, it’s very hard to predict how or when the conflict may be felt at the pump here.
Highlights from GasBuddy’s 2023 Fuel Outlook:
- The national average price of gas could cool early in the year as demand remains seasonally weak, followed by a rise that starts in late winter, bringing prices to the $4 per gallon range in time for summer. Barring unexpected challenges, prices in 2023 should return to normal seasonal fluctuations, rising in the spring, and dropping after Labor Day into the fall.
- Though most major U.S. cities will see prices top around $4 per gallon, areas of California like San Francisco and Los Angeles could again experience near $7 gas prices again in the summer of 2023 if refineries struggle under mandates of unique formulations of gasoline.
- Americans will spend an estimated $470.8 billion on gasoline in 2023, down $55 billion from 2022. The estimated yearly household spend on gasoline will also fall $277 to $2,471.
“2023 is not going to be a cakewalk for motorists. It could be expensive,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “The national average could breach $4 per gallon as early as May – and that’s something that could last through much of the summer driving season. Basically, curveballs are coming from every direction. Extreme amounts of volatility remain possible, but should become slightly more muted in the year ahead. I don’t think we’ve ever seen such an amount of volatility as we saw this year, and that will be a trend that likely continues to lead to wider uncertainty over fuel prices going into 2023.”
The highest gasoline prices are forecast to be seen in June, with an estimated peak of up to $4.19 per gallon on average. Diesel prices are forecast to average $4.12 in 2023, beginning the year at their highest level and then rebounding as high as $4.30 per gallon in June.
Download the full 2023 Fuel Outlook here.