When it comes to your energy bills, 2020 is arriving with good news and bad news. Drivers are in for higher prices at the pump, but it should cost most folks less to heat their homes this winter.
Per travel website AAA, the national average price of regular unleaded gas now stands at $2.59 per gallon. That’s not too painful when you think back to the days of $3 gas that prevailed up until 2014 (unless you live in a state like California, where prices average about a buck higher than the nation as a whole). Still, today’s average is about 25 cents higher than it was at the beginning of 2019. Given that crude oil prices are higher than they were a year ago, that’s not surprising. And unfortunately, odds are good that the price at the pump is only going to trend up as winter turns to spring.
In each of the past several years, retail gas prices have tended to bottom out around Christmas or early in the new year and then drift higher, often peaking in the late spring or early summer. That makes sense, given that Americans tend to drive less during the depths of winter and then hit the road for spring and summer vacations. Plus, refiners start to switch over to summer-blend gasoline formulations in advance of warm weather, which adds a bit to the final cost.
A big drop in oil prices could buck that pattern this year. But with energy firms paring back their oil drilling in the U.S. to improve financial results, and OPEC committed to keeping a lid on its exports, a big drop in crude doesn’t look likely at the moment. If the U.S. and China can make more progress on patching up their trade fight, oil could even creep a bit higher as traders bet on a stronger global economy.
In the near term, the bump in oil prices resulting from the U.S. strikes that killed a prominent Iranian general in Iraq will push gas prices a bit higher. Unless the Iranians retaliate in such a way that makes full-blown war a realistic threat, I expect oil prices to ease after a few days or a week. Still, it’s one more reason to expect fuel prices to trend up.
In fact, 2020 may be the year the national average price returns to the psychologically important $3 mark for the first time since October of 2014. (It came close in May of 2018, but topped out around $2.96.)
So budget more for road trips. But most consumers should see lower heating bills.
Per the Department of Energy, retail propane prices are running more than 40 cents per gallon less now than a year ago. Heating oil: Down 7 cents. Price data for residential natural gas deliveries aren’t available yet, but gas futures contracts are down substantially from their level of one year ago, so at least some gas customers ought to catch a break on rates.
Long-range weather forecasts are notoriously difficult, but for what it’s worth, the National Weather Service’s Climate Prediction Center sees most of the country experiencing normal to above-average temperatures this winter, versus a relatively small swath of the upper Midwest that is more likely to be below average. If that forecast pans out, and heating fuel prices don’t spike, most households should see some savings on their utility bills to balance out the higher cost of filling up their gas tanks.