AAA: Are gas prices headed back up?
Will gas prices jump as a result of the current issues facing the Colonial Pipeline in Alabama? Drivers across the Mid-Atlantic region are hoping not to have a repeat of what happened a little more than a month ago as gas prices in many areas went up following a pipeline break in late September. On October 31, an explosion occurred on Line 1 of the Colonial Pipeline. Portions of Colonial’s system send gasoline and other transportation fuels as far north as New York Harbor, supplying states in the Northeast. As of Sunday morning, Colonial reports that based upon their latest information, they continue to project a Sunday afternoon restart of Line 1.
Today’s average price for regular unleaded gasoline is $2.22 per gallon, which is one cent less than one week ago, the three cents less than one month ago and the same price as the same date last year.
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At the close of Friday’s formal trading session on the NYMEX, West Texas Intermediate (WTI) closed down $4.63 from last week to settle at $44.07 per barrel. Any jump in gas prices related to the pipeline disaster may be offset by tumbling crude oil prices as the global supply glut continues to cause concern. Crude oil has closed below $47 every day this week. Late last week, OPEC officials met in Vienna to hash out the details of a potential production freeze agreement, but several hours of discussions bore no resolution. Iraq and Iran have continued to voice concerns over participating in a production cut, and as a result, negotiations have stalled. Traders will continue to closely monitor OPEC negotiations for any indication of an agreement in the days leading up to the next official meeting scheduled for November 30.
“Prices around the Mid-Atlantic region have remained steady and have dropped in some areas,” said Tammy Arnette, Public Affairs Specialist for AAA Mid-Atlantic. “As long as the Pipeline issues are resolved quickly, prices should remain on the same track and even start to dip as crude oil prices are projected to stay low for a while, potentially until the election is over, balancing out prices at the pump.”
The supply chain response to the Colonial Pipeline’s current disruption may follow the response to the previous incident, with a drawdown of in-region inventories and increased reliance on alternative sources of supply such as long-distance trucking, marine shipments from the U.S. Gulf Coast, and imports. Retail gasoline prices in the affected areas (most likely Georgia and Tennessee) may rise but most Mid-Atlantic regions should see prices remain steady, unless the Sunday restart is delayed substantially.