Gasoline Prices Rising Into 2021 Driving Season; 3 Reasons More Upside Ahead

 | Mar 15, 2021 06:47

This article was written exclusively for Investing.com 

  • Peak season for demand begins in the spring
  • Gasoline prices have recovered and are heading for the 2018 high
  • Gasoline refining spread moves higher as the fuel outperforms crude oil
  • Three reasons why gasoline can continue to rise
  • UGA: risk position gasoline ETF

It's no secret that climate change is causing the world to move away from fossil fuel consumption. In the US, the Biden administration is shifting energy policy from hydrocarbons to alternative power sources. On his first day in office, the President canceled the Keystone XL pipeline project that delivers petroleum from Canadian oil sands in Alberta, Canada, to Steele City, Nebraska, and beyond.

Meanwhile, the majority of automobiles and other modes of transportation rely on gasoline and other fuels. While that may change in the coming decades, the foreseeable future will require gasoline and distillates to power cars, trucks, planes, and boats.

With the end of the pandemic in sight, as vaccines go into arms in the US and worldwide, energy demand is likely to rise over the coming months despite the shift in energy policy. The US had become the world’s leading oil-producing country, but those days appear to be over in 2021.

At the latest OPEC+ meeting, the Saudi oil minister told a reporter that “drill-baby-drill,” the previous US policy, is dead. With oil’s pricing power back in the Middle East and Russia’s hands, prices are likely to rise. Moreover, the end of the coronavirus will usher in a resurgence of energy demand. The price of gasoline been rising as we head into the time of year when people put more mileage on their cars. The United States Gasoline Fund (NYSE:UGA) is an ETF product that tracks the price of fuel.

h2 Peak season for demand begins in the spring/h2

During the winter months in the United States, drivers tend to put less mileage on their cars because of dangerous road conditions in many parts of the country. As the snow and ice melts and the warm winds of spring begin to blow across the US, odometers begin clicking at a faster rate, and gasoline demand rises. The peak driving season lasts from the spring through the fall each year and reaches its height in the summer months during the vacation season.

The 2020 driving season was a bust. The global pandemic caused people to work from home, lose jobs, and social distancing limited trips outside of their residences.

As vaccines are creating herd immunity to COVID-19, the prospects for 2021 are looking far brighter. The gasoline price has been moving higher since early November when it hit bottom as the market reflected the winter seasonality.