Tension in the middle east could send gas prices soaring this summer. Some experts predict you could be paying as much as $5 dollars per gallon. That's enough to scare anyone into staying home. But is it a real possibility?
According to GasBuddy.com... the year ended at the highest prices point Michiana had seen.
On Dec. 31, the average price for a gallon of gas in the U.S. was about $3.25. And this morning, gas was about $3.45 a gallon ... at a time when the expectation is prices will go up.
Andre McLin is no expert, but when it comes to gas prices it doesn't take an expert to tell you this: "Gas is quite high," says McLin.
Unfortunately for McLin, and all of us, those prices are only going to go up ... a lot. "Probably people will be using a scooter or catching a bus quite often," says McLin.
There is speculation that prices could hit $5 a gallon, but why and what do the experts think?
WSBT asked four experts: IU South Bend Economics Professor Lane David, Notre Dame Economics Professor Thomas Gresik, Saint Mary's Economics Professor Richard Measell, and GasBuddy.com Senior Petroleum Analyst Gregg Laskoski.
"Even if there was nothing else gong on in the world this is the time when gas prices do go up for a variety of reasons," says David.
"Gas prices are almost certainly going to go up," predicts Gresik.
But why are prices going up? Here is what they all said:
- Refineries switching to summer from winter blend:
Every summer prices tend to go up between 30 and 70 cents a gallon as refineries switch from winter blend to summer blend. Our experts say there is some shut down of manufacturing capacity at refineries during this time.
- More people will be diving, driving up potential profit levels:
Spring and summer are the seasons for travel.
- Global demand:
Long term, global demand for crude oil is growing. Gresik says in 2006 the world was consuming 85 million barrels a day in crude oil. In 2011 the world consumed between 87 and 88 million barrels of crude oil.
- Refinery capacity:
As the refineries in the US age, their capacity is decreasing. And recently, three major refineries in the north east closed down.
- Tension in the Middle East:
If war breaks out, prices will spike. There is speculation that Isreal could attack Iran. If that happens economists predict Iran could shut down the Strait of Hormuz which 20 percent of the worlds oil flows through. Laskoski says the price of crude oil could reach $200 a barrel meaning you can add about $2.00 onto what you are paying at the pump.
What are the experts' predictions?
Without a war in the Middle East, everyone we spoke with predicted prices will at least reach $4 a gallon.
"I would say we would be approaching 4 dollars," says Measell.
"We are looking at a price range in Indianpolis for example, Memorial day weekend, from $3.90 to $4.25 a gallon," says Laskoski.
"Right now we are at $3.29, so that puts us at the $4.20 range," says Gresik.
"Four dollars a gallon," says David, "I do think we will see that."
Even the experts can't agree on what gas prices will look like in the coming months .. And they have done their research and crunched the numbers. But they don't have a crystal ball.
So, for fun, we wanted to talk to someone who does: Barbara the Gray Witch.
"Unfortunately the gas prices are going to go up to $5 and maybe a little over," says Barbara at her Raven House office in South Bend. Barbara also predicted people would drive less when gas prices soared .. and on that point, the experts agreed with her.
