Americans who are already facing higher gas prices at the pump could feel even more pain in the coming months, a top Bank of America analy...
Americans who are already facing higher gas prices at the pump could feel even more pain in the coming months, a top Bank of America analyst predicts.
In a note this week, Bank of America's head of global commodities Francisco Blanch said he expects the Brent crude benchmark to hit $120 per barrel by July 2022, according to Bloomberg.
That would be a 43 percent increase from current prices, which at around $84 per barrel are at their highest level since 2014.
Gasoline prices, which on Thursday hit a national average of $3.415 per gallon according to the AAA index, are also at their highest level in seven years.
Bank of America's head of global commodities Francisco Blanch said he expects the Brent crude benchmark to hit $120 per barrel by July 2022
Americans who are already facing higher gas prices at the pump could feel even more pain in the coming months, a top Bank of America analyst predicts
BofA predicts that surging demand for oil, coupled with lingering constraints on refining capacity, will continue to send the price of oil up.
US crude oil production has still not recovered to pre-pandemic levels, and OPEC producers are withholding production to keep oil prices high.
Additionally, domestic producers are facing a credit-crunch that is hampering their ability to expand operations, as the major financial powerhouses scale back their investments in fossil fuels due to pressure over climate concerns.
Supply constraints and the grim situation in European energy markets are driving a global energy crisis that has seen prices for crude oil, coal, and natural gas skyrocket.
The continued uncertainty has also seen oil suppliers hold off on ramping up production, amid fears skittish consumer demand could once again disappear, as it did during the early days of the COVID outbreak.
For Americans, the price of gasoline has been the most visible symptom of the energy crisis.
Crude oil—the main component of gasoline—makes up nearly 70 percent of the pump price of regular gasoline, and gas prices tend to move up and down roughly in tandem with oil prices.
Gas prices are already at their highest level since 2014, according to AAA
One barrel of crude oil contains 42 gallons, but produces about 20 gallons of gasoline.
Because 70 percent of all retail goods are transported by truck, rising gas prices also fuel broader inflation by increasing shipping costs.
Normally, a $10 change in oil roughly translates into a 0.5 percentage-point move in headline U.S. inflation.
Oil has risen nearly $70 from its pandemic-low in April last year, an indication of how much it is feeding into current high inflation. Crude oil hit its all-time peak of $147 in July 2008 before plunging in the Great Recession.
BofA had already forecast that oil could top $100 over the next six months, and now predicts global oil demand recovery will continue to outpace supply over the next year and a half, reducing inventories and sending prices even higher.
Gas prices are shown at a station near the Space Needle in Seattle in September. Energy prices are soaring in 2021 and could go even higher, analysts say
According to new data from the Energy Information Administration (EIA), total domestic gasoline stocks decreased by 2 million barrels to 215.7 million barrels last week.
However, gasoline demand also fell from 9.63 million barrels per day to 9.32 million barrels per day.
The drop in demand helped slow the rate of price increases, but elevated crude prices continue to put upward market pressure on pump prices, which will likely keep rising as long as oil prices are above $80 per barrel, according to AAA.
'We have finally seen a little dip in domestic demand for gasoline, which may signal that the seasonal post-Labor Day easing was a little delayed this year,' said Andrew Gross, AAA spokesperson.
'And if the recent steady increase in crude oil prices takes a breather too, consumers may benefit at the pump with smaller price hikes.'
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