Gas prices could reach $4 by May, adjacent to oil pressures

Gas prices (RB=F) could go as high as $4 per gallon ahead of the summer driving season, according to Goldman Sachs, if geopolitical events continue to pressure crude oil prices (CL=F, BZ=F). Yahoo Finance Senior Business Reporter Ines Ferré explains the commodity price patterns.

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Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

JULIE HYMAN: All right, US crude hitting $85 a barrel today. Brent hovering around 88. Wall Street analysts have been increasing their oil price targets amid the commodity. Steady price increases. Yahoo Finance's Ines Ferre is here with more. What's been driving this higher?

INES FERRE: Yeah, Julie, well, a number of factors driving oil prices higher. So you have the expectation that OPEC+ is going to carry on with their production cuts. There's also been rising tensions in the Middle East. That has also been sending prices higher.

And then you've got the Russian refineries that have been attacked recently. So all of this has had the steady climb effect on the price of oil. And so we're watching WTI today passing through $85 a barrel.

Brent crude passing through $89 per barrel. And analysts have been raising their price targets over the last couple of months. Now, last month, Russia said that it would cut its output further.

And that's when JP Morgan analysts came out and said, that those Russian actions could push Brent to 90 in April, reach mid-90s in May, and close to 100 by the time that we get to September. Now, the team at JP Morgan does believe that there are several levers that can be pulled here. And one of them being a summer release of the SPR. And the other one being, of course, demand destruction that starts kicking in when these oil prices start to push up against $90 a barrel.

But we have seen Goldman Sachs also saying that they see a range this year anywhere between 70 and 90 for Brent and Morgan Stanley that hiked its price for target for oil at $90 for Brent by the time that the third quarter rolls along. As you can see, we are less than $1 away from that target.

JOSH LIPTON: And, Ines, I'm sure viewers watching right now. Their natural next question is, what does it mean for gas prices, Ines?

INES FERRE: Yeah, well, what's interesting is that JP Morgan note said that gas prices could reach $4 per gallon by May if we continue on like this. We are right now at about $0.04 higher than we were for the average last year. It's about $3.53 per gallon.

But we're not at the peak driving season yet. So if these oil prices persist, you can expect to see gas prices continue higher. This is an election year though.

So analysts are saying that everything will be tried in order to make sure that these prices, gas prices don't get too out of hand.

JOSH LIPTON: Ines, thank you. Appreciate it.