On average Americans paid $3.49 a gallon for gasoline in 2013. That’s the lowest average price since 2010, and the AAA said on Tuesday that it expects the average to be slightly lower in 2014. The year will get off to a rocky start, though, with the average price of gasoline at $3.32 a gallon on New Year’s Eve, the highest on record according to AAA.
A spokesman for AAA said:
Gas prices should average slightly less in 2014 if everything goes as expected, but most drivers may not even notice because the difference could be relatively small. Increased refinery capacity and domestic crude oil production should help provide a cushion in case something goes wrong, but there are no guarantees when it comes to gas prices. There will remain an outside chance of paying higher prices due to unexpected global events or significant economic growth.
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The AAA’s outlook could get derailed though. During the year we should also expect to hear a clamor from the big oil companies and the larger independents to lift the U.S. restriction on crude oil exports that has been in effect since the mid-1970s. Refiners will oppose lifting the ban on exports, but they are not likely ultimately to prevail. Political support for raising the ban won’t surface until after the mid-term elections, but no matter which political party prevails next November, the ban will probably be gone sometime in 2015. When the export ban is lifted, consumers should expect gasoline prices to rise, perhaps sharply.
The last report on GDP growth gave crude oil a last-minute boost in mid-December and probably added a dime to the cost of a gallon of gasoline by the end of the year. There is almost no chance that third quarter GDP growth of 4.1% will be repeated in the fourth quarter, and a lower growth will likely put downward pressure on crude prices.
The trends are clear: Americans are driving less and they are purchasing new, more fuel efficient cars at a rising pace. The result is that oil consumption in the U.S. is declining and will continue to decline. That does not mean that gasoline prices will fall to, say, $2.50 a gallon. That could happen, but it is unlikely. But an average price of $3.40 to $3.45 a gallon in 2014 with no sharp spikes is definitely possible and would be a welcome change after the volatility of the past few years.