Goldman Sachs: Gas Prices to Rise Back to $4.35 a Gallon

Gas prices are displayed at an Exxon gas station in San Francisco, Calif., on July 5, 2022. (Justin Sullivan/Getty Images)

Despite gas prices having dropped about 70 cents on average over the past month, investment bank Goldman Sachs predicted prices will soon rise again.

Gasoline prices will likely rise to roughly $4.35 per gallon by the end of 2022, Goldman Sachs analysts said in a report. Goldman analysts also predicted a price increase in 2023, rising to above $4.40 on average, according to the report, which was released on Sunday.

The average price stands at around $4.05 per gallon nationwide, as of Monday morning, according to AAA’s data. That’s down about 70 cents from a month ago. In June, the average price hit $5 per gallon for the first time ever.

The reason for the increase, the investment bank said, is due to supply shortages and sustained high demand.

“Our updated fundamental forecasts point to continued disappointments in supply, with demand instead supported by the still ongoing COVID-19 reopening and gas-to-oil substitution,” Goldman said in the report. “This requires demand destruction on top of the ongoing economic slowdown, requiring high retail fuel prices to end the market deficit.”

As a result, Goldman said it forecasts “that U.S. retail fuel prices will rally into year-end, then decline from second quarter 2023 onward as refining and marketing margins start to normalize,” reported Business Insider.

Political Impact

Rising prices are sure to negatively affect the Biden administration, which has tried to capitalize on marginal drops in gas prices. The White House also claims that it is because of actions the administration has taken—including releasing oil from the Strategic Petroleum Reserve—in recent months.

White House officials have pointed in particular to Biden’s decision in March to release 180 million barrels of oil from the U.S. emergency stockpile, which they said likely caused prices to drop by up to 40 cents per gallon.

However, Republicans and some analysts have noted that gas prices have continued to rise under the Biden administration. According to data from the Energy Information Administration (EIA), the average price for a gallon of gas was $2.37 on Jan. 18, 2021—or about three days before Biden took office. Since then, according to the EIA’s data, prices have consistently gone up.

At the same time, Biden has increasingly criticized and targeted large oil corporations, claiming they’re gouging consumers by artificially keeping prices higher. But the heads of ExxonMobil and Chevron refuted Biden’s claims and said the administration has persisted in maintaining a relatively hostile environment for oil firms to do business.

On Monday, oil prices hovered near multi-month lows that erased earlier gains. Brent crude futures were down 55 cents, or 0.6 percent, at $94.37 a barrel by Monday morning. U.S. West Texas Intermediate crude was at $88.25 a barrel, down 76 cents, or 0.9 percent.

“Last week’s price action left no doubt that recession-driven demand concerns have the upper hand over supply fears. One could even go as far as saying the war premium has evaporated,” PVM analyst Stephen Brennock said.

Reuters contributed to this report.