Gas may cost less in 2013

NEW YORK – At least gasoline should cost you less in 2013.

Hamburger, health care and taxes are all set to take a bigger bite out of the family budget this year. But drivers’ annual gas bills are expected to drop for the first time in four years.

Forecasters say ample oil supplies and weak U.S. demand will keep a lid on prices. The lows will be lower and the highs won’t be so high compared with a year ago. The average price of a gallon of gasoline will fall 5 percent to $3.44, according to the Energy Department.

“Everything is lining up to lead to softer prices this year,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.

That would still be the third-highest average price ever. But a discount of 19 cents per gallon from 2012 would save the typical household $205 this year and free up $25 billion that could go instead to restaurants, malls or movie theaters – the kind of consumer spending that accounts for 70 percent of American economic activity.

“It’s a little benefit to the economy, and it’s a little more reason the Fed doesn’t have to worry about inflation,” said James Hamilton, an economist at the University of California at San Diego who studies energy prices.

Forecasters caution that they can’t predict other factors like Middle East tensions, refinery problems or hurricanes along the U.S. Gulf Coast – in other words, the same events that caused gasoline prices to spike in 2011 and 2012. Any or all of those troubles could crop up again in 2013 and push pump prices above last year’s record average of $3.63 a gallon.

The government expected gas to average about $3 during 2011. Then came the Arab Spring, which included the shutdown of Libya’s oil production. Oil prices shot up, and gasoline averaged $3.53 for the year.

And, Hamilton said, consumer spending might not see a boost from lower gasoline prices because most Americans will be paying higher taxes.

But after average gas prices rose in 2010, 2011, and 2012, a little relief will be welcome in 2013.

Gas prices set records each of the past two years for a few reasons. Global demand has risen as the developing economies of Asia, Latin America and the Middle East burn more gasoline, diesel and jet fuel. At the same time, unrest in the Middle East has sparked fears of widespread supply disruptions in a region that produces a quarter of the world’s oil.

This year, global oil demand is expected to rise slightly again, but increased production, especially in the U.S., should keep supplies ample. The U.S. Energy Information Administration said this week that American production will grow next year by 900,000 barrels per day, the nation’s biggest single-year increase ever. By 2014, U.S. production will reach its highest level since 1988.

At the same time, U.S. gasoline consumption is back down to 2002 levels because of more fuel-efficient cars and the tepid economy. It isn’t expected to rise this year or next, according to the Energy Department.

That means the U.S. will need to import less oil, which will increase global supplies and help tamp down prices somewhat.

The current average retail price of gasoline is $3.31 per gallon, 6 cents lower than last year, according to AAA, OPIS and Wright Express. AAA predicts gas won’t surpass $3.80 a gallon this year.

The peak last year was $3.94, reached in April. The auto club also says average pump prices could drop to as low as $3.20, a level the country hasn’t seen since February 2011.

AAA forecasts the national average will peak between $3.60 and $3.80 in the spring, then drop to between $3.20 and $3.40 by mid-summer. It will rise again during the hurricane season along the Gulf Coast, the nation’s oil-refining hub, before moving lower toward the end of the year.