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Gas prices expected to rise in 2021 amid COVID recovery
Gas prices
Gas prices

Gas prices are expected to rebound from historic 2020 lows as the nation looks to continue to recover from the profound economic impact of the COVID-19 pandemic.

GasBuddy, a travel and navigation app used by North American drivers to save money on gas, predicts 2021 may feature a sharp rally in gas prices by year end, warning that the national average could rise to as high as $3 per gallon should the nation broadly recover from the COVID-19 pandemic. 

While the risk exists for some pain at the pumps during the year, GasBuddy expects the yearly average will jump a more modest 27 cents per gallon in 2021.

The national average is forecast to rise as much as $1 per gallon from a low in January to a possible peak in July, as the nation continues to recover from the COVID-19 pandemic, boosting demand as Americans slowly return to pre-COVID behaviors.

Warren Martin, Executive Director of Kansas Strong, a non-profit organization representing Kansas oil and natural gas producers, agrees gas prices are likely to rise significantly in 2021, but cautions how it impacts both area consumers and area producers could vary significantly depending on what drives the rise in gas prices.

Many unknowns remain about what factors may impact gas prices in 2021, the largest likely factor driving gas prices in the year ahead will be COVID-19, and whether there is a broad recovery after the severe shutdowns and restrictions that sunk gasoline demand and prompted Americans to work and learn from home.

Martin expects demand for gasoline will most likely increase at least somewhat as the nation continues to recover from the pandemic and travel more, which will help demand for crude oil, a staple of the central Kansas economy. A market-driven increase in gas prices driven by increased production and demand would be a positive.

“A slight rise gas prices is generally very beneficial to rural communities, where a lot of those jobs are dependent on the production of oil, especially around the Great Bend area and western Kansas,” Martin said. “A lot of the counties out there are highly dependent on production of oil.”

However, a gas price increase driven by other factors could be detrimental to both consumers and oil producers in the area.

One significant uncertainty Martin cited is what the nation’s energy policies will look like under President-elect Joe Biden. 

He said initial indications from the incoming administration’s energy policy suggest there are likely to be significantly increased, and potentially costly, regulations on the oil and gas industry. These regulations, he said, increase the cost of production for oil and gas producers. He believes these new, more extensive regulations proposed by the administration as it seeks to re-enter the Paris Climate Agreement, would have the effect of artificially inflating fuel prices even more. This, Martin said, would likely be detrimental to both gas consumers and to local oil and gas producers.

“If (a gas price increase) comes through regulatory burdens that are placed on producers, refiners and distrbutors, then that would be negative for the people of Kansas, both the producer and the consumers,” Martin said.

Other unknowns, according to Patrick De Haan, head of petroleum analysis at GasBuddy, include whether oil production globally will return as quickly as demand may. Should production lack the rebound in demand, consumers are likely to be pinched at the pump. 

“While Americans are nearly guaranteed to see higher gas prices in 2021, it’s not all bad news. Average prices are still likely to be quite affordable, but some distinct and unpredictable changes in the COVID-19 pandemic may leave their wallets a bit more empty this year,” De Haan said.