The economy has enjoyed high consumer confidence of late. In fact, the index hit its highest level in 13 years in December. The Conference Board, which tracks consumer confidence, attributed the result to expectations tied to the economy, jobs and income post-election.
And, of course, gas prices are closely linked to consumer confidence. As one goes, the other usually follows—in the opposite direction. Let’s hope that’s not the case in coming months, as prices are expected to increase.
GasBuddy, a gas price analyst firm, predicts that in 2017 the national average for a gallon of gas will be $2.49, or 36 cents higher than last year.
The forecaster said the 20 largest cities in the country should brace for prices as high as $3 per gallon.
Already, prices have seen a slight uptick from $2.17 in November to $2.24 in December. This runs counter to trend since gas prices are typically lower at the end of the year.
The predicted surge is seen as a reaction to OPEC’s announcement in November that it would cut crude oil production by 1.2 million barrels a day starting the first of this year. Later, other oil-producing countries followed suit, announcing cutbacks of their own.
The increase also coincides with higher gas taxes in seven U.S. states, the largest of which is Pennsylvania, which will see a 7.9 cent increase per gallon.
Prices, though higher, aren’t expected to break any records. And, as only one factor that influences consumer spending, the net affect of higher prices at the pump might be low.
“While gasoline prices nearly always follow the same direction as crude oil and represent an important barometer for consumers and their personal budgets, the increases we anticipate this year may be met with less resistance than in the past if economic improvement softens the blow,” said Gregg Laskoski, senior petroleum analyst, GasBuddy. “If the Trump Administration delivers on its promises; lower taxes, more jobs, higher salaries and savings…then a concurrent increase in demand and gasoline prices may be easier to digest.”