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Where gas prices are headed in 2022, according to leading forecast models

December 13, 2021, 4:45 PM UTC

Demand for petroleum absolutely crashed at the onset of the 2020 lockdowns as air travel, cruise trips, and daily office commutes evaporated. The ensuing buildup in crude oil supply—and the lack of places to store it—culminated in the futures price of domestically produced crude briefly going negative in April 2020. At the bottom of the crash, sellers of West Texas Intermediate (WTI) contracts were paying buyers $37 per barrel to take their oil.

Lately we’ve had the opposite problem: Not only did oil prices rebound, they’re higher now than prior to the pandemic. When oil prices crashed last year, producers had no choice but to cut production. That reduced supply was quickly outmatched as the historic economic recovery saw demand roar back sooner—and stronger—than expected. As of Friday, that WTI contract price stands at $69.62 per barrel—up 52% from December 2020. That has also translated into higher prices at the pump. The average U.S. regular price of $3.34 per gallon is up 55% since December 2020.

But where are oil and gas prices headed in 2022? To get an indication, Fortune reviewed several leading forecast models.

The big takeaway: While U.S. government forecasts predict both oil and gas prices will see a decline in 2022, many private sector forecasts show the opposite occurring.

When it comes to domestically produced crude, Barclays predicts that the WTI contract price will increase from the current rate of $69.62 to an average price of $77 in 2022. The bank says the Biden administration’s recent release of oil from the Strategic Petroleum Reserve isn’t a sustainable way to bring down prices, and the dip we’ve seen in recent weeks “would only be temporary.” Prices could go even higher than forecast, the bank says, if COVID-19 outbreaks are minimized and thus allow demand to grow by more than expected. Simply put: If the pandemic winds down next year, that could put more upward pressure on prices.

That assessment is shared by Goldman Sachs. Oil analysts at the investment bank see “upside risks” that contract prices for Brent crude—oil drilled off the shore of Europe—could climb from the current price of $73 to $85 per barrel by 2023.

But the U.S. Energy Information Administration (EIA) doesn’t agree. Instead, the government agency is predicting (see chart above) that the WTI price per barrel will drop to $62 by the end of 2022, and Brent oil contracts will fall to $66 per barrel. The reason? EIA says the supply and demand mismatch for crude will ease in 2022.

“We forecast that rising production from OPEC+ countries and the United States will lead to global liquid fuels inventories increasing and crude oil prices falling in 2022,” wrote EIA researchers in their 2022 outlook. “Low crude oil inventories, both globally and in the United States, have put upward price pressure on near-dated crude oil contracts, whereas longer-dated crude oil contract prices are lower, likely reflecting expectations of a more balanced market.”

If crude prices do fall significantly, it would translate into lower gasoline costs at the pump. That’s exactly what EIA is predicting. By January, it forecasts that average gasoline prices (currently at $3.34) will drop to $3.01 per gallon. For the 2022 calendar year, it expects regular U.S. gasoline prices to average $2.88 and diesel to average $3.19 per gallon.

Of course, all of these models are built on assumptions that could easily go astray. The biggest risk? That OPEC and its allies don’t follow through on their 2022 plan to up production.

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