Rising gasoline prices are taking a toll on the finances of middle and lower-income families. Gas prices in the U.S. have gone up significantly in 2021 and have continued to move upwards in September. When will gas prices go down?
First, we should understand that gas prices in the U.S. and globally are a function of crude oil prices, refining margins, and taxes. A sudden spurt in demand or a supply-side bottleneck might also impact prices in the short term. However, in the medium to long term, crude oil prices are the biggest driver for gas prices.
Why have gas prices been going up?
Gas prices have been going up amid the rise in crude oil prices. Brent crude oil is back above $80 per barrel, while WTI prices are trading near $76 per barrel price levels. WTI crude oil prices are currently trading at three-year highs and consumers are feeling the pinch in the form of higher gas prices.
Higher fuel and food prices have also pushed up U.S. inflation. While the core inflation is at 4 percent, the CPI was 5.3 percent in August.
Now, crude oil prices have been going up amid a perfect storm driven by both demand and supply factors. Crude oil demand has been strong as the economy reopened. Also, the supply hasn’t gone as much as many people feared. There have also been intermittent supply-side disruptions that have supported oil prices.
Goldman Sachs crude oil price forecast
Goldman Sachs, which previously had a year-end target of $80 for Brent, has now raised its forecast by $10 to $90. As I noted in a previous article, the $80 target seemed too low considering the momentum in crude oil prices.
While higher oil prices are a boon for energy giants, whose earnings are sensitive to crude oil prices, they're also a dampener for the monthly budgets of ordinary Americans. Higher crude oil prices are reflected in higher transportation costs, which in turn lead to higher prices for goods. Also, they're reflected in higher gas prices because prices react to changes in crude oil prices.
When will gas prices go down?
With the holiday season approaching, many people wonder if gas prices will go down anytime soon. If Goldman Sachs is correct, gas prices might not come down in 2021. The outlook for crude oil prices looks bullish, both technically and fundamentally.
Meanwhile, Goldman Sachs has some good news for consumers. It expects Brent prices to fall towards $80 in 2022. For WTI, it expects prices to rise to $82 in 2021 and then fall to $77 by the end of 2022
Can you benefit from higher gas prices?
When crude oil prices go up, gas prices rise too. There isn't much that consumers can do to offset the impact of higher gas prices. However, there are ways to benefit from higher gas prices in the U.S. First, you can trade in gasoline futures to benefit from the increase in gas prices. Another way would be through buying a gasoline ETF like the United States Gasoline Fund (UGA).
Meanwhile, you can also trade in crude oil prices and futures to benefit from higher crude oil prices. There are several options including the riskier leveraged energy ETFs. Another approach would be to buy stocks of oil-producing companies or go for ETFs that invest in them.
To sum it up, while gas prices might not come down anytime soon looking at the forecast for crude oil prices, you can still benefit from higher oil prices.