Gas Prices Will Climb Even Higher In 2012

2011 was a bad year for gas prices, but a good year for Big Oil. 2012 is shaping up to be even worse, with a perfect storm of ending energy subsidies, uncertainty in the world’s busiest oil-shipping corridor, and growing demand from developing nations. Could this be the first year of $5 a gallon gasoline?

In the year 2011, gas prices averaged over $3.50 a gallon nationwide, 72 centers a gallon higher than in 2010. Analysts are estimating that in 2012, gas prices will average between $3.80 and $4.13 a gallon for the year. In some places, gas could top $5 a gallon. That’s no surprise to me, as there are a number of contributing factors at work here.

For one, Congress voted to end the ethanol blenders tax credit after 30 years. Oil companies were recieved 45-cents per gallon of ethanol blending into gasoline. Since most of us fill up with E10, that results in a 4.5 cent per gallon increase, right there.

But the end of ethanol subsidies isn’t the only issue. Iran has been threatening to close the Straight of Hormuz, through which 20% of the world’s oil passes every day. That is about 17 million barrels of crude pass through the Straight of Hormuz which, at its narrowest, is only about 34 miles wide. If Iran shuts the straight down (which is extremely unlikely) it could send shockwaves through world energy prices.

Even if Iran only threatens to close the straight, it could be enough to rattle skittish investors, who through speculation could drive oil prices sky high. Add to that recent protests and revolutions in Nigeria, Libya, Egypt, Syria, and other oil-producing countries and, well, the whole place is one match away from becoming a revolutionary tinderbox.

And finally, there is the developing world, nations like China, India, and Brazil, where a surge in the middle class has brought a desire for more cars, and more fuel. There is only so much oil to go around at any given time, and with the U.S. economy finally looking like it might rebound, we will be wanting to use more fuel, too.

If you were thinking about doing that alt-fuel conversion, now might be a good time…

Source: ABC News | USA Today | The Atlantic | Image: Andre Blais via Shutterstock

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Tags: 2011, 2012, annual, average, costs, Ethanol, gas, gas prices, Gasoline, iran, Oil, oil prices, prices, record prices, rising, Straight of Hormuz

About the Author

Christopher DeMorro A writer and gearhead who loves all things automotive, from hybrids to HEMIs, Chris can be found wrenching or writing- or esle, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.

chuck stone

Chris, you are so soft and gentle about the Big Oil issues. So let me help you make the point with this post. Most American people are so busy with earning a living they don’t have time to study the problems of fuel availability. Some just want big engines that serve speedy driving at any cost. Others just want big cars to impress their friends. The rest will only complain when the higher price hits them at the pump.

A wimpy small car is not for me the say. But as we saw in the oil crisis of 1973 and1979 they get angry and start shooting each other in the gas lines. Your rundown on the 2012 potential oil problems is right on target. But what do you want us to do about it? The politicians are paid off to support Big Oil, the Department of Energy has never done it’s job to produce a technology for an alternative to gasoline. All the US Government has produced for 40 years is to control alternatives, hand out money to academics for studies, and control private alternative producers to the point of strangling them. Government alternative fuels testing when successful has always dried up to nothing – a replacement for gasoline has never gotten to the street.

When I was young I believed we could develop anything we needed by applying our intelligence as a society. But now I see that we are soooo captive by Big Oil that we are the oil slaves and there is no out under todays government. Since the Clean Air Act of 1973 we are prevented from even tampering with our cars. Our children can’t learn by working under the hood as we did in the 40s,50s,and 60s before the Clean Air Act

I think the Clean Air Act did a lot to help us look at the emissions issue, but it applied rules to individuals that should only have been applied to big auto makers. Innovative individuals and small companies are too restricted to produce alternatives. Henry Ford would have been arrested and faced 6 months in a federal prison and $5,000 fine for building a car.

Now, I want you to open the window, stick your head out and yell, “I have had enough, and I am mad as hell, and I won’t take it anymore”. This is a line from the movie “Network”. Keep us on track Chris, I like your articles.
Tim Cleland

“I think the Clean Air Act did a lot to help us look at the emissions issue, but it applied rules to individuals that should only have been applied to big auto makers. Innovative individuals and small companies are too restricted to produce alternatives. Henry Ford would have been arrested and faced 6 months in a federal prison and $5,000 fine for building a car.”

It’s as I’ve said all along. Most government regulations are designed to favor big business and hobble competition.
Tim Cleland

Five dollar per gallon gasoline is exactly what we need to spur conservation and innovation on alternatives.
It will be painful for a while, but it’s a pain that will ultimately make us stronger.
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http://Web Vargus secundo

I don’t quite get the whole hype about US gas prices: Considering the price of US$ 1.50 per litre of petrol in Germany, which is about $5.70 per US gallon, gas prices in the US are still fairly low, even if they would climb up to $5.00 per gallon.
roastedbeans

This isn’t Europe with easier access to real alternative transportation options, so yes it does lead to “hype”.
David

Two thoughts – 1. As the cost of gas increases, the economics of hybrids, and EV’s improves. This would suggest to me that there will be a cap somewhere – above this cap – we will all start demanding EV’s. 2. On a very similar note – the cost of wind and solar is dropping – and closing in on grid parity. Again – doesn’t higher gas prices improve the economics of competitor fuels – which should act as a moderating influence on gas. Surely there will be demand destruction if the price goes too high. Thanks.
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