Why Gas Will Not Reach $5 per Gallon This Year

Like there was last year and the year before last, there is once again speculation about the average price of gasoline in the U.S. possibly reaching $5 per gallon. And once again, it’s not going to happen. I don’t care what anybody says. I suspect that they might get slightly above $4 (at the most) before Memorial Day and then start coming down again. Don’t be fooled by the load mouths and doomsayers in the media.

When gasoline or oil prices are going up, they almost always think that those increases will continue on that same trajectory indefinitely. But that’s not how things work in the real world markets. At some point, just as it has in years past, rising gasoline and oil prices will cause the supply of those products to exceed the demand for them. That’s when the prices will begin to fall again. Remember where you heard this first.

Comments

[Kevin Delaney]

The loose monetary policy of the Fed might result in a sudden burst of general inflation, but, I agree, the inflation won't be led by fuel prices.

[Hank Martin]

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