Oil prices could temporarily spike to $80 per barrel or more this summer as demand comes roaring back.

The reopening economy has already sent crude up about 40% since the start of the year, but a surge in driving by Americans, as well as an increase in goods transportation and air travel, could pressure prices further.

For consumers, that means the typical early summer peak in gasoline prices could come later in the season. Unleaded gasoline was $3.04 per gallon on average Wednesday, about a penny higher than last week but more than 50% higher than a year ago, according to AAA.

Brent futures, the international crude benchmark, settled up 1.6% at $71.48 per barrel Wednesday, the highest since Jan. 8, 2020. West Texas Intermediate futures for July were 1.6% higher at $68.83 per barrel, after hitting a high of $69.65, the highest since Oct. 23, 2018.

“Demand is ramping up very quickly because everybody’s driving, and we have the reopening of Europe, which is really starting to happen,” said Francisco Blanch, global commodities and derivatives strategist at Bank of America. “India seems to have hit an inflection point, in terms of cases, which in my mind could mean you also get a return of mobility.”

Energy analysts agree the world is in for a period of higher prices, but they do not agree how high or for how long. Blanch said Brent has already hit his $70 target for the quarter, but he has a much more bullish longer-term view than others.

“We think in the next three years we could see $100 barrels again and we stand by that. That would be a 2022, 2023 story,” Blanch said. “Part of it is the fact we have OPEC kind of holding all the cards, and the market is not particularly price responsive on the supply side and there is a lot of pent-up demand … We also have a lot of inflation everywhere. Oil has been lagging the rise in prices across the economy.”

Members of OPEC and their allies, a group known as OPEC+, are gradually returning oil to the market. They agreed to implement their previously planned production increase of 350,000 barrels in June and another 450,000 barrels a day starting in July. Saudi Arabia also agreed to step back from its own cuts of about a million barrels a day, which was put in place earlier in the year.

OPEC+ had agreed in April to increase output by more than 2 million barrels a day by the end of July.

The U.S. industry is producing about 11 million barrels a day, down from about 13 million before the pandemic. But analysts say it’s not clear how fast or whether U.S. companies will restore that production.

“The sensitivity of producers to price changes has declined because of capital discipline,” said Blanch. He said there is pressure on companies to be cautious in how they use capital after the collapse in prices last year.

“Right now we’re in a position where prices are rising, companies are reluctant to invest,” Blanch said. “They are paying down debt and increasing dividends.”

He said there is also pressure on corporate boards to divest hydrocarbon assets and to work toward net zero on carbon emissions by 2050. “You have two major forces hampering capex in the energy sector right now,” Blanch said.

For now, oil production has not kept up with demand, as global economies rebound. Even after OPEC+ committed Tuesday to return crude to the market, the price of oil continued to tick up.

“Welcome to the post-pandemic world,” said Daniel Yergin, vice chairman of IHS Markit. “We’re seeing demand is growing rapidly between the first quarter and the third quarter by 7 million barrels a day.”

Yergin said his Brent target is an average $70 per barrel this year.

“There’s an incredible case where the oil price could get to $80, but there would be a reaction to that. That would start to affect demand and also there would be a political reaction to that,” said Yergin. “You’ll start to see phone calls being made. [President Joe] Biden has been in politics long enough to know that high gasoline prices are always a problem for whoever is president. That’s true even in eras of energy transitions.”

There is so much demand growth that analysts expect the market to be able to absorb an additional million barrels a day of Iranian production should it return to its previous commitments on its nuclear program, as sought by the Biden administration. But when that might happen is uncertain.

“The return of Iranian barrels does not appear to be an imminent issue for the oil market with the fifth round of nuclear negotiations in Vienna failing to produce a major diplomatic breakthrough,” wrote Helima Croft, head of global commodity strategy at RBC.

Croft added that International Atomic Energy Agency verification of Iranian enrichment activities appears to be one of the issues that must be resolved before sanctions relief would be provided by the Biden administration.

“With the Iranian election season in full swing, it now looks like the return of those sanctions restricted barrels will likely be a summer discussion item for OPEC,” she noted.

Croft said it is also important who becomes the energy minister for Iran following the election. The current minister has supported an orderly return to the oil market.  

“How they return will be important and we’re closely watching what will happen with their floating storage which has been rising,” she said. Croft said if Iran’s oil is not restored in a steady way, it could spook the market and temporarily send prices lower. The market will react “if it’s a shock and awe show based on them dumping all their floating storage.”

Separately, Iran’s largest naval ship the Kharg sank on Wednesday after catching fire in the Gulf of Oman. The crew were reported safe, and no other explanations were given for the incident, according to Iran media.

According to John Kilduff of Again Capital, bullish demand and price forecasts have supported the gain in crude prices this week. He said OPEC predicted that demand could reach 99.8 million barrels a day by the end of year, but supply is expected to reach just 97.5 million barrels a day.

“I’ve been bullish for awhile now,” said Kilduff. He expects to see Brent hit $80 a barrel and WTI trade between $75 and $80. “The demand trends have been exploding … The real throes of this I imagine will come as we get closer to Labor Day.”

Kilduff said the key to the longer term view is how much the U.S. shale industry resumes its former activities and pushes ahead.

Lee expects U.S. drillers to return to their prior levels of production ultimately but he does note a change in attitude.

“If you split them up, the private companies have been responding quickly. The public independents and the majors have been a lot more cautious,” he said.

OPEC + does not currently see a threat from the U.S., and it has plenty of spare production capacity to curb higher prices and add supply if it needed to. Previously, higher prices would be an invitation for the U.S. shale industry to pump more, which could in turn drive prices down.

“They’re not seeing U.S. producers coming back very strongly at the moment, and I think they’re of the view that U.S. producers won’t come back strong,” he said. “In terms of how they’re behaving now, they’re not so worried about shale right now so they’re more willing to hold back production.”