Motorists should brace themselves for more frustration as gasoline prices in the United States continue their upward climb.
As of Tuesday, the average national gas price reached approximately $3.78 per gallon, marking a significant increase of about 25 cents compared to just a month ago. According to AAA, this surge in prices is noteworthy, considering that while they are still significantly lower than the prices seen last year during the global energy price surge after Russia’s intervention in Ukraine, such a rapid rise is atypical.
AAA spokesperson Andrew Gross pointed out that such a substantial price hike typically requires an event like a hurricane to trigger. This situation is particularly intriguing given that fewer people are refueling their vehicles this summer compared to previous years.
Gasoline prices in the United States are intricately linked to the fluctuations in crude oil prices. The U.S. relies heavily on West Texas Intermediate (WTI) crude as its benchmark, which has maintained a level above $80 per barrel since last Thursday, and it currently surpasses $81 as of Tuesday afternoon. This rapid increase represents a substantial $12 surge from the figures observed on July 3, as reported by Tom Kloza, the global head of energy analysis at OPIS.
Gross and Kloza point to several factors contributing to the escalation of oil prices, which include production cuts at a global supply level and the effects of unusually high summer temperatures on refineries. Here is a breakdown of the key details:
THE CULPRITS BEHIND THE UPWARD TREND IN GAS PRICES: HEAT AND REDUCED PRODUCTION The surge in gas prices can be attributed, in part, to the extraordinary heat experienced this summer. Unprecedented high temperatures have played a role in driving up the cost of gasoline.
“While the heat may be discouraging people from going out, it’s also impacting refinery operations,” clarified Gross. He highlighted that refineries are typically engineered to function within a temperature range of 32 to 95 degrees Fahrenheit (0 to 35 degrees Celsius). “Extreme temperatures pose risks in these facilities, so they curtail production for safety reasons, which then reduces the supply.”
Kloza provided insight into the scale of the issue, explaining that the Gulf Coast has around 10 million daily barrels of U.S. refining capacity. However, due to the heatwave, these refineries are currently operating below their usual capacity. This shortfall is resulting in a daily loss of hundreds of thousands of barrels.
Nevertheless, Kloza remarked, “The struggle of some refineries has translated into handsome profits for those that can maintain operations.” Presently, the U.S. domestic demand hovers around 9 million barrels per day, slightly below the anticipated peak for summer months. Despite this, the nation is engaged in substantial gasoline exports.
Expanding on the factors influencing this situation, Kloza pointed out that major oil-producing countries within the OPEC+ alliance have enacted supply cuts. For instance, in July, Saudi Arabia initiated a reduction of 1 million barrels per day in its global oil exports. Russia has also decreased its oil exports, he added.
Gross emphasized that these production cuts are not uniform across OPEC member states. He further suggested that as inflation subsides, improving economic prospects might also contribute to the global pressures affecting oil prices.
WHICH STATES ARE EXPERIENCING THE HIGHEST GAS PRICES TODAY?
As is customary, specific regions within the U.S. are grappling with higher gas prices compared to others. This divergence can be attributed to various factors, spanning from regular maintenance activities at local refineries to restricted supplies in particular states.
Based on AAA’s data for Tuesday, California topped the list with the highest gas prices in the country, averaging around $5.01 per gallon. Following closely were Washington and Oregon, registering prices of $4.96 and $4.92 per gallon, respectively.
Conversely, Mississippi held the position of the lowest average gas price at approximately $3.29 per gallon. It was trailed by Louisiana at $3.39 and Alabama at $3.40 per gallon.
WILL GAS PRICES MAINTAIN THEIR ASCENT?
Forecasting the trajectory of gas prices in the upcoming weeks is a challenging endeavor, as indicated by experts.
While an eventual respite from the scorching heat is expected with the transition into fall, both Gross and Kloza have emphasized the potential influence of hurricanes. The onset of hurricanes often prompts refineries to curtail their operations for safety reasons.
Kloza elaborated, “If we could be certain that the Gulf of Mexico won’t experience tropical storms or hurricane-force winds, I would anticipate relatively smooth sailing for the remainder of the year. However, that’s a significant uncertainty,” he noted, alluding to the anomalously high water temperatures recorded in the region recently.
HOW CAN I REDUCE FUEL CONSUMPTION?
If you’re aiming to minimize expenses and decrease your visits to the gas station, there are several strategies you can adopt to enhance your mileage efficiency.
Maintaining proper tire pressure is a crucial practice, emphasized by Gross. Low tire pressure not only poses safety hazards but also results in suboptimal fuel efficiency, leading to increased expenditures over time.
AAA provides further guidance on economizing fuel consumption, such as utilizing cruise control whenever feasible, refraining from overfilling your tank during refueling, and decluttering your car’s trunk by removing unnecessary items to reduce excess weight.
By implementing these measures, you can make meaningful strides toward economizing your fuel usage and saving money at the pump.