Get Ready for $4 Per Gallon Gas Prices in 2012

Peaking in December, gas prices could "spring ahead" to over $4 come 2012.

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Gregg Laskoski is a senior petroleum analyst for GasBuddy.com

With about 30 days left in the year many Americans are pleasantly surprised to see the price at the pump in steady decline even as crude oil is trading at $95 per barrel or higher. The national average price of gasoline at $3.30 per gallon has fallen by 15 cents a gallon in the past month.

Naturally, some markets have fallen significantly.  Atlanta, Dallas, and Cincinnati, for instance, have seen their average prices fall by 20, 21 and 22 cents per gallon respectively while other markets like New York ($3.64 per gallon average)  and Chicago ($3.52 per gallon average price) have declined by just 8 cents from the previous month.  Many west coast markets are also seeing declines with cities like Seattle and San Diego posting 17-cent decreases from their month-ago averages.  Believe it or not, even San Francisco's average price of $3.75 today shows a 15-cent reduction from a month ago.

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Nonetheless, despite the trend, the national average price of gasoline is still 46-cents per gallon more than it was a year ago at this time. And history tells us that means consumers should expect trouble ahead. Why? Because for the past seven years the average price movement from the  national average "floor" on December 31 to the "peak" price recorded in the next 12 months has averaged 93 cents per gallon.  

Last year was actually a good snapshot of what we've seen for the past seven. 2010 ended with the national average at $3.05 and we saw the annual spring climb of 2011 push the national average 91 cents higher to its peak as early as May 11 when it reached $3.96 per gallon.

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In three of the last seven years, the spread between the ‘floor' price and the peak exceeded $1 per gallon and only once in the past seven years was the spread below 82 cents per gallon.  And, while we typically anticipate "peak" prices to occur in the midst of the summer driving season, you'll see in the chart below that in two of the last three years the peak has occurred in October and December. 

U.S. National Avg. “Floor” to Peak Retail Gasoline Prices

Right now New Mexico is the only state to have an average price below $3 per gallon. While past performance is no indication of future prices, if the national average and the price of gas in your state doesn't move much closer toward $3 per gallon by the year's end, next year when gas  prices "spring ahead" many of us may be paying $4 or more…possibly a lot more. 

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