Why Analysts Think Big Jump in Gas Prices in 33 States Will Be Short Lived

By Lee Jackson Updated Jan 13, 5:23PM EST · Published Nov 9, 12:20PM EST

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Why Analysts Think Big Jump in Gas Prices in 33 States Will Be Short Lived — © Thinkstock

While the precipitous drop in oil prices has been tough for the companies in the energy sector, it has been a solid boon to the pocketbooks of American consumers. In addition to providing extra spending money, it has to some degree kept a lid on transportation costs, which are expected to drop especially if the airlines resort to price wars next year.

A jump in the price of crude oil near the end of October helped to push retail prices at the pump higher in the first week of November. In fact, according to data provided by GasBuddy, 33 of the nation’s 50 states saw a modest rise while 17 states, many of which saw the prices react and jump at a much faster rate, have seen prices already start to taper back.

The report also noted that six states are seeing prices that are at or below what many consider to be a psychologically important level at $2 a gallon. The five states where motorists continue to enjoy the lowest prices include South Carolina ($1.94), Louisiana ($1.96), Alabama ($1.96), Texas ($1.98) and Mississippi ($1.99), which are seeing the nation’s lowest averages.

Analysts are optimistic that prices will fall back, and point to numerous reasons why. Specifically, continued high OPEC, and especially Saudi Arabian, production are keeping a glut on the market that is tough to plow through. With the busy summer holiday driving season over until next year, and refinery maintenance starting to wind up, the stockpiles have stayed significant. In fact, the GasBuddy report indicates that oil inventories remain 100 million barrels higher than year ago levels, and short of some drastic geopolitical black swan event, those elevated levels should stay in place for the foreseeable future.

The fact that oil is priced in U.S. dollars also helps to contribute to the ongoing price weakness. With the Federal Reserve very likely to hike rates in December after a strong October nonfarm payrolls report, the likelihood of continued dollar strength is certainly anticipated.

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The good news for consumers, and perhaps the overall economy, is the extra spending dollars could help to contribute to a very healthy holiday shopping season. With consumer spending almost 70% of the overall U.S. gross domestic product tally, fourth-quarter GDP could get a solid spending boost, one that could help what has been a very tepid year overall.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.