GasBuddy Head of Petroleum Analysis Patrick De Haan details the outlook for energy prices in 2023, the impact of geopolitical obstacles in foreign and domestic markets, and anticipated diesel price trends.
- Gas prices climbing for the fourth straight week, up around $0.35 in the month prior according to national averages from AAA. Crude oil pulling back slightly today after recent gains. Our next guest can explain what is weighing on oil and where prices might go in the coming weeks and months. Patrick de Haan, GasBuddy head of petroleum analysis, with us now. Good to see you, Patrick. So why is gas rising back again so quickly? How high do you think it will go?
PATRICK DE HAAN: Well, a lot of this really started back in mid-December with that arctic blast which shut down refineries due to extremely cold weather. Many of those refineries, of course, exposed to the elements and extremely cold temperatures can lead to equipment malfunctions, pushing off millions of barrels a day in production.
And then shortly thereafter, China announced it's reopening. Something you were talking about in the previous segment. Something that also has a major influence on the price and consumption of crude oil. That's pushed oil back close to $80 a barrel. In addition, we have the end of the release from the SPR. No oil was released last week.
In addition, new sanctions on Russia by the EU causing some level of nervousness as well. So all of that has pushed up gas prices, a trend that could continue in the weeks ahead as refineries are on the cusp of starting maintenance season. And then the trend is in the summer, gasoline just around the corner.
- So, Patrick, then how high are prices headed? We're at 3.45 today. You're saying the trends to the upside. Back above 4?
PATRICK DE HAAN: I certainly think that that is where we'll head. It's a question of when, not if. I think something like that could happen by potentially April. Maybe sooner. We have a pretty heavy amount of refinery turnarounds that are going to start here in the next couple of weeks and that's going to lead to a diminished amount of gasoline supply. At the same time that pipelines are starting to roll over to that summer spec of gasoline. So I think motorists are going to start getting squeezed more so starting in late February. The next three weeks could be a bit of a mixed bag.
- Politics, like everything comes into play here as the White House Press Secretary, Patrick, said house Republicans will vote to raise gas prices on American families. Is there any truth to that? And has the Biden administration put this country in good position as we begin '23?
PATRICK DE HAAN: Well, if you're a motorist, this would be like putting on sunblock to block the harmful rays of the sun. I think politics is the same thing. And too bad there's no lotion that you can put on to have all of that bad information bounce off of you. But a lot of this political, on both sides of the spectrum, finger pointing isn't going to slow down. But at the end of the day, it has everything to do with supply and demand. And it really doesn't matter who's in the White House or who has power. Supply and demand is really the ultra power in control of the market.
And with China reopening, you can't underscore enough. The US economy, when we reopened, saw a level of pent up demand. I would expect that once China gets over the hump of initial surge in COVID cases, that the same would apply in China. And that is likely to chart our course for the next three to six weeks as China gets underway.
- Patrick, what about diesel? Because today's average 4.63. We're looking at a month ago was actually higher at 4.69, the big driver there. And I guess, why are we seeing the opposite effect in diesel when you compare it to what's happening in regular gasoline?
PATRICK DE HAAN: Well, gasoline has come down a lot quicker than diesel. Diesel has really rebounded. I should say supply of diesel has continued to rebound in the last few weeks and that's given stations more of a margin on falling prices. So that's kind of delayed diesel's increase. But that has now happened. Diesel price is picking up about $0.02 a gallon in the last week.
All of the story, what diesel really has to do with a recovery in diesel supplies, as we've seen certainly a bout of warm weather the last few weeks, diminishing the consumption of heating oil in areas of the Northeast, but now diesel prices may inch up. But keep in mind, as we start to see warmer weather as we get closer to spring, it's really going to be two questions. The warmer weather, how will that impact demand here and what's going to happen not only in China, but the global economy.
Keep in mind, diesel prices have far more exposure to what's going on in Europe. Europe continues to import diesel. And now with those February 5th sanctions that are going to be on refined products from Russia, diesel prices could be in the spotlight again here soon.
- You talking about that weather. Still waiting for the first flakes of snow in New York City approaching a record. Quickly natural gas has plummeted more than 50% in the past month. Will that continue? What are the implications?
PATRICK DE HAAN: Well, certainly, compared to starting the winter, natural gas is very tight. Europe inventories were looking challenged. And now Freeport coming back online, there could be a level of recovery once FERC approves Freeport reopening their facility. But for now, thanks to that warm weather, thanks to the fact that New York hasn't seen a flurry fly or at least a tenth of an inch, I think is the measurement, that's part of the reason why natural gas prices have been suppressed this winter is because of warm weather here and in Europe leading to above average supply.