2011 Gas Prices Will be High

         It seems as though the average price of a gallon of unleaded gas will stay above $3 throughout 2011; however, global refineries are predicted to slightly increase production, which will hopefully stabilize prices for this year. For the first time in two years the national price of a gallon of unleaded topped $3 and rose to $3.05 last week. The recent rise in gas prices is said to be due decreased production globally, and many experts in the oil industry warn that prices may still have a long way to rise.

     Jeff Rubin’s 2011 crude oil forecast suggests that the price of oil has a very good chance of surpassing $100 a barrel. He sites the BP oil spill as a big contributor to the price of oil going up. The oil spill could inspire government policies that would restrict drilling of that kind. If oil companies are forced to pursue other supplies of oil, acquiring that oil could be more expensive, thus raising prices. Inflation could also have a negative effect should we experience a double dip recession, especially if the economy starts to grow. While demand for gas grow the supply would be able to keep, inflating prices.

     The Obama administration has announced its ban on offshore drilling in the eastern Gulf of Mexico, as well as the Atlantic coast for a minimum of 7 years-- due to the BP oil spill. Perhaps this is one of the government regulations former Shell oil president John Hofmeister was referencing in a television interview where he predicted gas prices would reach $5 a gallon by 2012. The announcement to ban offshore drilling was not Obama’s initial plan. He actually announced his decision to hunt for oil and gas only three weeks prior to the largest offshore oil spill in U.S. history.

     Whether or not inflation or offshore drilling regulations are to blame, many are predicting a decline in production will reduce crude oil supplies in 2011. The Energy Information Administration (EIA) predicts a decline of 30,000 barrels a day of domestic crude production, down to an average of 5.47 million barrels per day. These predictions by the EIA are heavily based on the forecast of declining production in both Alaska and the Gulf of Mexico.

     Whatever the case may be, the price of gas is sure to only go up. While production declines, consumer demand is continuing to go up every day, putting more pressure on a small supply. Investigating this upcoming years forecast in crude oil is one way to prepare oneself for the New Year. That being said, 2011 will not likely be a good year at the pump, unless of course, you’re on the profiting end.