Gas and Diesel Prices 2012: My Projections for 2012.

Fuel is a major concern for everyone businesses and consumers alike are affected when the price of fuel increases because this one Super-Commodity drives drives prices up at every stage in the supply chain. Oil prices are very difficult to understand because it is not a normal commodity because Oil is a key component to everything that is produced today in some shape or form. Oil also has two distinct markets Crude Oil(downstream) which impacts the prices of all Petroleum Products, and Refined Oil the largest of which are Gasoline and Diesel which mostly impacts the price at the pump.

A little timeline to why the Price a the pump has increased and will likely continue to do so for the rest of 2012:
Currently the US is exporting more Refined Oil products than we are importing i.e. Gasoline and Diesel. The daily export rate is around 3 Million barrels per day, the US consumes around 8 Million Barrels per day. So we exporting a 38% surplus of REFINED petroleum products( not crude). Were it not for increase in world demand for Fuel then the price at the pump in the US would be substantially lower.
Let's see what has happened recently
- In 2011 the US consumption of fossil fuels decreased dramatically compared the preceding several years. US consumers did a lot of things to prevent those dreaded trips to the gas station.
- While consumption of Fuel in the US has decreased, the demand for Fuel in emerging markets has been on the increase.
-Brazil for example entered the world market in a heavy way late 2011. Brazil has depended on ethanol from sugar for that last several years, but in 2011 there was a major shortfall in the sugar crop and ethanol production, so Brazil had to go out and buy Gasoline, a good portion coming from the US. This added pressure to demand for Fuel and the world  price increases. In late October 2011 the Brazilian government announced that they would lower the taxes on Fuel to help ease the prices at the pump because Brazil was going to the world market to supplement their gasoline needs. After the announcement Fuel Prices in the US surged for the next 4 weeks.
-In mid-February China announced that they would be raising the ceiling for Gas Prices in a response to their need for Refined Fossil Fuels, and the increasing price in the world market. A week later the fuel prices surge to a record high for February.

I am only presenting two small examples about how the world market is affecting the price we pay at the pump. As world consumption has increased due to emerging markets. Fuel prices which were once driven mainly by Crude Oil prices, are now under pressure in both Crude Oil markets and Refined Oil markets. For US consumers the problem is even worse because in the world market the US is competing against countries that have energy policies that help consumers and businesses. The recent energy policies in the US have been punitive in nature towards the consumer and businesses which will only propel our fuel prices even more as other countries enter the market to buy our refined oil. This is not a political statement, but an observation.

For 2012 the price of Fuel is Likely to increase Significantly. 
The price for Diesel has increased in 2012 an average of 12.42%, however from week to week the rate of increase has slowed as Diesel reaches an equilibrium price. The coefficient for the rate increase using the current numbers is 0.0052. Please see the chart below.

The chart above shows the increase in Fuel price this 2012 over 2011, as you can see the rate of increase is declining each week as the price of Diesel approaches an equilibrium price in the world market. Please note the R2 is 66% which means that the Line with a Coefficient of 0.0052 explains 66% of the data. Which important in the next graph below.

The above graph are the projected prices for 2012. This based on the benchmark of how high prices have been over 2012 versus 2011. This is also considering the Regression Line which show a decline in price increases over last year, but the increase in fuel prices over last year seem to have plateaued at this time.