An employee of a gas station adjusts gasoline pump prices as they continue to fall with the oil market in turmoil on April 21, 2020, in Arlington, Virginia.
Olivier Douliery | AFP | Getty Images
U.S. spending on gas this year should see a modest recovery after a nearly $100 billion decline in 2020 due to the coronavirus pandemic, according to fuel data company GasBuddy.
GasBuddy is forecasting U.S. gasoline spending this year to rise to $325.6 billion, up 16.3% from $280 billion in 2020 – the lowest spending since at least 2004. That includes all gasoline supplied to the U.S. market for consumers and commercial customers.
“Americans pumped far fewer gallons last year than a normal year,” Patrick De Haan, head of petroleum analysis at GasBuddy, told CNBC. “Volumes for gasoline are nowhere near they usually are.”
Like nearly everything in 2020, Covid-19 upended the gasoline and oil industry. That included oil prices, which are linked to gasoline prices, following into negative territory for the first time ever as Covid-19 spread across the U.S. causing lockdowns last spring.
The higher spending this year is expected to get a boost from a 27 cent-per-gallon average increase in gas prices nationally, according to GasBuddy, which collects data from more than 150,000 gas stations in North America. More Americans are also commuting for work instead of using public transportation or driving instead of flying, De Haan said.
“Overall, I think there’s more likelihood that prices will rally in 2021 compared to 2020 as Americans at least start to try to learn how to live in this pandemic environment,” De Haan said.
Regarding gas prices, GasBuddy expects much of the U.S. population to see prices remain in the $2 per gallon range. But major cities in California and Hawaii should spend the entire year over $3, while others such as Chicago, New York City, Philadelphia and Seattle are also at risk of seeing average prices over $3 per gallon in 2021.
GasBuddy expects gas prices to average $2.44 per gallon in 2021, up from $2.17 per gallon in 2020.
De Haan cautioned that Covid-19 could once again disrupt the market if more lockdowns occur or a problem occurs with vaccine rollouts. The incoming Biden administration, which has backs the use of electric vehicles, also remains a wild card regarding potential taxes and regulations on fossil fuels.
“There’s a lot of variables that could inevitably change what we are expecting in our forecast,” De Haan said, adding the impact of Covid-19 is more of a threat than the Biden administration in 2021.
On the opposite end, De Haan said another concern is demand for gas rising faster than supply. Gasoline is derived from crude oil, and retail gas prices are tied to the market price of crude oil and wholesale gasoline prices. If supplies become low due to cuts in capacity in 2020, the market may not be able to meet demand, which would cause higher prices, De Haan said.