Oil prices tumbled this week, but drivers dreaming of cheap summer road trips might want to temper their expectations: Experts say a host of factors, including overseas output cuts and refinery operations, will actually make for higher gas prices over the coming months.
The benchmark price of West Texas Intermediate fell 5 percent on Wednesday, dropping below $50 on news of higher-than-expected stockpiles and domestic output. On Thursday, the price of crude oil fell to $49.28, its lowest close since November.
Although dropping below the $50 threshold is largely symbolic, staying there could be a strong indication of a longer-term price trend, said Patrick DeHaan, senior petroleum analyst at GasBuddy.
"As long as it maintains under $50 and closes under $50 today, we're gaining strength that it stays there. If we close under $50, that will certainly add a lot of credibility for the correction," he told NBC News.
Unfortunately for drivers, analysts say this won't have a pass-through effect on gas prices in the near future.
"There never really is a glut of gasoline in the U.S.," said Tom Kloza, global head of energy analysis at Oil Price Information Service. While crude oil can be — and is — stockpiled and stored for months at a time, it's not feasible to do the same with gasoline.
"Gasoline moves in an elliptical orbit to crude," Kloza said. "While I think crude is going to remain under pressure on either side of $50, gas prices are moving higher."
Betting on the Wrong Side of $50
Part of this week's drop in crude prices can be attributed to speculators getting cold feet. When OPEC hammered out a deal late last year to cut production, investors jumped into the market on the expectation of rising prices, and some of those are now rethinking their bets.
"They're waiting for evidence that's happening — that evidence has yet to emerge," said Richard Mallinson, an analyst at Energy Aspects.
"What I would say we've seen in the last couple of days is indicative of what happens when the biggest fundamental of all gets a twist, and that's the money flow," Kloza said. "The reason we've seen a breakdown this week is a lot of the more capricious money exited," he said. "They got nervous and they sold."
Ramped-Up U.S. Output
OPEC's cutbacks have given the U.S. and Canada a green light to restart oil production in the Permian basin and elsewhere that was sidelined when oil prices started collapsing in mid-2014.
"Currently, domestic oil production has done a good job of countering production cuts seen by OPEC and has kept market prices relatively flat," AAA spokeswoman Tamra Johnson said. "Peaks in oil prices will largely depend on the future of the OPEC agreement and the direction of U.S. production."
So far, those signs tend to be positive. "With U.S. shale production… we're seeing a pickup in drilling activity and investment, and a lot of optimism," Mallinson said.
Shale oil production is a younger industry than conventional drilling, so one X factor is how much and how fast it can grow. "The big uncertainty is how big the uptick and how big that recovery will be because we haven't had that kind of upswing cycle," Mallinson said. Output could disappoint, or it could blow expectations out of the water.
Refiners Are Stockpiling
Another factor weighing on oil prices is seasonality. This is the time of year when demand from refiners historically weakens, as they make the switch from winter to summer blends and perform maintenance in advance of the summer driving season.
"Everyone forgets about the middleman — the U.S. refiner," DeHaan said. "They're not drawing down inventory because they're doing maintenance on their plants."
Ordinarily, gas prices rebound from their late-winter seasonal lows when demand jumps in the summer. If the price of oil stays low this year, that's when savings finally could be passed onto customers at the pump.
Since sub-$30 prices for oil were an unsustainable fluke, customers shouldn't be expecting a rerun of last year, and it does appear that consumers have already baked somewhat higher prices into their expectations.
How Much Can We Expect to Pay at the Pump?
In a February survey by the National Association of Convenience Stores, 46 percent of respondents said they expect gas to be much or somewhat higher a month from now; only 35 percent said the same a year ago. In a separate survey which asked people to estimate how much a gallon of gas will cost at the beginning of next year, the median was $2.70.
That might not be too far off the mark.
"We expect that the national average price for a gallon of gasoline will likely peak between $2.70-$2.80 this summer," the AAA's Johnson said.
DeHaan said that although the net effect will still mean higher prices at the pump, drivers should look at the tank as half full. "There are increasing odds that the seasonal rally in gas prices may not be as severe as it has in recent years," he told NBC News.
"If crude oil sees a big pullback at the same time gas prices are usually spiking, that's really going to mute the rally," he said.