Gas Prices on Fiscal Cliff Watch

JERSEY CITY, N.J. -- Even as 2012 draws to a close, gas prices continue to make news. After a year of record-high numbers at the pump, prices had been steadily decreasing for the past few weeks. However, like just about everything else, what happens at the pump will depend partially on the looming fiscal cliff.

While all eyes are on Washington, D.C. to see if legislators can reach a deal to avoid falling off the fiscal cliff, gas prices would actually increase if a deal is reached. According to AAA, any deal would translate into good news for the economy, and a good economy raises the demand for gas resulting in higher prices at the pump, as reported.

Tom Kloza, chief oil analyst with the Oil Price Information Systems (OPIS) agreed with this assessment but noted that some regions of the country, like the Midwest, could see periodic price cuts even if legislators come to an agreement.

"The region that is most susceptible to the reappearance of price downdrafts in winter is the Midwest, thanks to very cheap crude that is available to Great Lakes states' refineries," he said, referring to Canadian crude and, increasingly, shale oil from North Dakota.

Gas prices began a slow decrease in mid-September as the peak summer driving season came to an end, refineries switched to winter gasoline blends and oil prices fell below $90 per barrel as crude stockpiles increased. The decline is typical for the last three months of the year, just as an annual spike in prices typically occurs in the spring, the news site reported.

"Gasoline prices are extremely cyclical, or seasonal," Kloza said. "There is an overwhelming tendency to see the bottom of the wholesale cycle in November or December. Retail prices generally lag by about 10 days."

However, the looming crisis could cause the pattern to shift prematurely, in the opinion of the AAA. Financial analysts believe that without congressional action, the automatic, across-the-board tax increases and simultaneous deep federal spending cuts will push the nation's economy back into a recession, meaning demand for fuel and other oil products will fall, according to

Kloza did offer a ray of hope, according to the news site. Even if the politicians reach a deal and the economy continues to grow, gasoline prices probably will not hit 2012 levels, he said. "I believe that 2013 retail prices for all areas, save the West Coast, will be perhaps 10 to 25 cents per gallon or so lower than in 2012."

The Energy Information Administration (EIA) also sees lower average prices in 2013. In its monthly energy outlook, issued Dec. 11, the EIA projected that the national average gasoline price in 2013 would be about $3.43 per gallon, down 20 cents from the 2012 national average price of $3.63 per gallon, the report stated.

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