My Energy Sector Predictions For 2019

I typically make a natural gas prediction, but the fundamental picture is mixed. Inventories are still extremely low, which should call for higher prices. But natural gas prices are quite low to start the year. If the inventory picture improves, they will stay low. If not, we will see a lot of volatility. It’s a coin flip, so I am going to forego a natural gas price prediction this year.

But here’s one where I think the picture is clearer. On New Year’s Day, President Trump tweeted:

President Trump’s tweet on gasoline prices.

Gasoline prices have fallen sharply because oil prices have collapsed. President Trump did influence that by conning Saudi Arabia into increasing production and then letting Iran continue to export oil. This prediction is related to my oil price prediction, but I expect that gasoline prices are going to end the year significantly higher than they began the year. Further, December gasoline prices are usually low, because seasonal demand is low (and it’s cheaper to produce winter gasoline).

The price of WTI averaged $65.23/bbl in 2018. Given that we are starting the year nearly $20/bbl below that price, I think it’s unlikely that the 2019 average will top that. In turn, I don’t think the national average 2019 retail gasoline price will top the 2018 average price of $2.81/gallon. But I do think gasoline prices are going to rise well above the year-end price of $2.36/gallon.

On the flip side, U.S. gasoline inventories are currently pretty high, and that will provide headwinds for a while with respect to gasoline prices. They only reached $3.00/gallon during two weeks in 2018, and I think there is a good chance they don’t reach that level at all in 2019. It hinges on how quickly oil prices make a move higher.

I think we will see a gasoline price spike this year, albeit it not as high as in previous years. However, we don’t normally see year-end gasoline prices rise by at least $0.30/gallon higher than the previous year. It has only happened once since 2010, but I predict it happens again this year.

4. The diesel premium over gasoline will at least double in 2019.