You can predict gas prices tomorrow if you know the seven general trends that influence them. This knowledge will give you the background to understand the overall price movements. You should also familiarize yourself with how gasoline and oil futures contracts work. These contracts give you an indication of the price movements that will occur in the upcoming days and weeks.
Expected Trends Affecting Gas Prices
Gas prices are highly volatile. This is not only because drivers have few other options, but also because many events impact them. Before diving into predicting gas prices for tomorrow, you should be aware of the seven fundamental factors that contribute to the price you pay at the pump. These factors will help you anticipate seasonal changes and sudden spikes in gas prices.
Seasonality
Gas prices typically rise in spring and summer and fall in autumn and winter. The demand for gasoline increases during the summer due to the higher number of American families taking road trips. Additionally, gasoline contains a variety of additives to prevent evaporation during warm summer months. Refineries begin preparing for summer gasoline production in spring. Refineries shut down for necessary maintenance and adjust their operations to meet higher evaporation standards. Even though refinery shutdowns are announced in advance, gas prices can spike if a lot of supply is cut off. Prices usually decrease in autumn as demand falls.
Natural Disasters
Gas prices rise after hurricanes or other natural disasters. This is linked to the fact that most refineries are located along the Gulf Coast. If damaged, gasoline cannot be distributed properly. Immediately after Hurricane Katrina, gas prices soared to over $4.00 per gallon, adjusted for inflation.
Supply Threats
Significant threats to global oil supplies can drive oil and gas prices higher. For example, Russia is a major oil and gas producer. Its war against Ukraine has contributed to raising the average American gas prices from $3.50 per gallon in February 2022 to $5 per gallon by June 2022.
Speculation
Commodity traders can create a price bubble through pure speculation. This happened during the credit crisis in 2008. When the stock market collapsed, traders turned to oil contracts to make money, even with declining demand and rising supply. On July 3, 2008, local oil prices reached a record high of $145.31 per barrel. This soon led to gas prices rising to $4.16 per gallon.
Regional Variances
Gas prices vary from region to region depending on government taxes and regional blends. For instance, California prices are usually the highest, due to special blends and taxes that can be as high as $0.79 per gallon. When there is a shortage in one area, it is difficult to use gasoline from another area due to varying blends. This is why the supply shortage in California led to gas prices reaching $4.66 per gallon on October 6, 2012, while the national average was a dollar less.
Value of the U.S. Dollar
The value of the dollar can influence oil and gas prices. Oil contracts are priced only in dollars. When the dollar’s value rises, oil prices often fall. Oil-importing countries benefit from a stronger dollar, as they do not need to impose high costs on oil. This was the case between 2014 and 2016, when the dollar began regaining strength, and global oil prices fell.
Peak Oil
The final trend is that the world will eventually run out of oil. This long-term trend has not yet affected any price changes. There are still substantial reserves in Saudi Arabia, which is currently the leading oil supplier.
Contracts
Gasoline and Future Oil
To get a better insight into future gasoline prices, look to the commodity markets. There, traders offer contracts for the delivery of gasoline for the next month. This is called a “futures contract,” which is an agreement between a buyer who will use the gasoline and a seller. The buyer can be a gasoline distribution company, a transportation company, or a large corporation. The seller is usually a refinery.
Many futures commodity traders may not intend to own the gasoline. Instead, they aim to profit from the trade. They buy now, hoping the actual price will rise so they can sell the contract for a profit. These traders bear a lot of the volatility in gasoline prices. They speculate and often exaggerate actual trends in supply and demand.
The commodity is referred to as “the regular gasoline futures contract at the New York harbor.” Daily charts show what traders are offering and at what they are closing contracts for each future month. There is more volume for the closer delivery dates, making these prices more reliable. As many factors can change affecting oil and gasoline prices, these charts change daily.
You can also trade gasoline contracts directly through the CME. It’s another way to realize a direct profit from your expectations of gasoline prices tomorrow. Another indicator of gasoline prices tomorrow is the price of Brent crude oil futures contracts. Generally, gasoline futures prices will follow oil prices. Sometimes oil prices may be low, but gasoline prices can rise due to distribution failures from natural disasters or seasonal plant closures.
Look at both charts for confirmation and to understand what is happening to influence gasoline prices. With this knowledge, you will be able to predict gasoline prices for tomorrow today.
Frequently Asked Questions
Who controls gasoline prices?
When it comes to the price you pay at the gas station, it is determined by the gas station. That’s why there may be price differences between gas stations on the same street. At the macroeconomic level, supply and demand forces for oil dictate gasoline price trends. Stations still control gasoline prices, but prices won’t drop significantly at one station while rising at another nearby.
Which state has the cheapest gasoline price?
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Source: https://www.thebalancemoney.com/how-can-you-predict-tomorrow-s-gas-prices-today-3305649
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