New projections by the U.S. Energy Department offer a glimpse at how much you’ll be paying for gasoline this summer.
The U.S. Energy Department sees gas prices peaking at $2.50 a gallon this June, which is 10 percent higher than last summer’s peak of $2.23.
Demand for oil is flat, according to Sean Hill, an economist with the U.S. Energy Information Administration. And that means the rise in prices is driven mainly by a 20 percent increase in crude oil prices.
“So ultimately the oil price that we’re seeing today is just a reflection of the global oil supply and demand balance, which is still for the most part oversupplied relative to what it was 3-4 years ago,” he said.
But there are a number of forces working to cut into that oversupply.
Last year the Organization of the Petroleum Exporting Countries, or OPEC, signed an agreement to cut overproduction, which was keeping prices low.
And some U.S. oil suppliers stopped production when the price per barrel fell below $50, making it unprofitable.
That combination diminished the oversupply of oil, helping push prices higher.
And even though U.S. oil demand is flat, we’re consuming 9.5 million barrels per day, maintaining a record level reached last summer.