First it was a tax hike. Now consumers are looking at a higher than expected gasoline bill for 2013.
The government on Tuesday boosted its forecast for gasoline prices this year by 11 cents to an average of $3.55 a gallon. That would be the second-highest annual average, behind last year’s $3.63 a gallon.
The revised forecast follows a more than 10 percent increase in gas prices since the middle of December. The Energy Information Administration, the statistical arm of the Energy Department, said the average gas price jumped from $3.25 on Dec. 17 to $3.61 Monday.
In its monthly Short-Term Energy Outlook, the EIA primarily pins the increase on higher oil prices. Brent crude, the benchmark for many international varieties of oil imported to the U.S., rose from $109 a barrel in mid-December to about $119 in early February. That $10 increase equates to about 24 cents per gallon of gas, the EIA says. U.S. benchmark crude rose $8 a barrel to nearly $96 in the same time frame.
The price of oil rose Tuesday as OPEC upgraded its forecast for global demand and the Group of Seven industrial nations pledged not to devalue their currencies.
Benchmark oil gained 48 cents to finish at $97.51 on the New York Mercantile Exchange. Brent crude, used to price international varieties of oil, rose 53 cents to end at $118.66 a barrel on the ICE Futures exchange in London.
U.S. consumers are already feeling a pinch from higher taxes. The expiration of last year’s payroll tax reduction will cost an extra $579 for households making $40,000 to $50,000 in 2013, according to the Tax Policy Center, a nonpartisan Washington research group.
Still, there is some good news: The government expects oil prices to drop because of increased production in countries outside of the Organization of the Petroleum Exporting Countries. For instance, crude oil production in the U.S. is expected to grow 13 percent to 7.25 million barrels a day this year.
As a result, the government says, gasoline should peak at an average $3.73 a gallon in May, 21 cents below last year’s high of $3.94 in early April.
OPEC, the Vienna-based organization comprising many of the world’s key oil exporters, raised its 2013 forecast for global demand to 89.7 million barrels per day — 80,000 barrels more than its previous forecast a month ago — citing “some signs of recovery in the global economy and colder weather at the start of this year.”
It said about half of the demand increase over 2012 would come from China.
Oil prices were also supported by a rise in the euro against the dollar. The increase makes it cheaper for European traders to buy crude oil, which is priced in dollars.
The euro rose after the finance ministers from leading industrial nations, including the U.S., Japan and Germany, insisted they remained committed to exchange rates driven by the market — not government policy — and would consult closely when it comes to sharp movements in foreign currency markets.