If the global economy is indeed starting to stabilize at today’s lower GDP, we may see oil prices continue to rise above $53 per barrel and summer gasoline may go beyond diesel’s current price of ~$2.20 per gallon. But that remains a big if since revised US GDP figures for the 4th quarter of 2008 show a steeper decline of 6.3% and the number of people receiving unemployment benefits continues to break records. I believe the equilibrium price for gasoline will be above $2.50 once the economy truly stabilizes, but that may be at least a couple quarters from now.

The gasoline price won’t get much support from natural gas in the near term. Today’s EIA natural gas storage report showed inventories actually went up last week, compared to a normal drop of ~50 billion cubic feet. Storage thus sits around 29% above last year and 20.4% above the five-year average. These bearish numbers will probably send natural gas prices below $4 per million Btus (MMBtu) again and even below $3.50 per MMBtu until lower prices force more producers to cut their production.

Bottom line: The rise of gasoline prices amidst such a rough economy shows that we really must focus on efficiency and substitution to renewables if we are to prevent the return of $4 or higher gasoline once our economy hits another growth spurt.