Motorists continue to feel sticker shock at the gas pumps, as prices shoot ahead toward the dreaded $4.00 per gallon mark. Gas prices have climbed for the past 36 days (through Friday, Feb. 22). In the past week alone, the national average price jumped 14 cents to $3.78 per gallon Friday, the highest on record for this calendar day. In the past month, prices skyrocketed 46 cents (or 14 percent) and are currently 17 cents (or 5 percent) higher than year-ago prices. The 46-cent month-over-month increase is the most dramatic since June 2009. The largest increase on record was August 5-September 4, 2005 when prices jumped 75 cents largely because of Hurricane Katrina.
This year’s run-up of gas prices is not only larger and faster than recent years, but is beginning earlier. The price run-up in 2011 began in mid-February, when the national average increased for 27 consecutive days, starting an 86-cent surge to the peak of $3.98 on May 5. In 2012 the surge began at the end of January and increased 66 of 71 days to a peak of $3.94 on April 5 and 6. This year’s gas price run-up began on Jan. 17.
The primary driver for the earlier than usual price increase is the trend of U.S. refineries performing seasonal maintenance and making the switch-over to summer blend gasoline production earlier in the year. Regional supplies can decrease when refineries go offline and subsequently markets are more sensitive during the changeover period to refinery disruptions that would further squeeze supply, as we have seen this year. Another reason for the price shock is the fear factor of deepening turmoil and unrest in the Middle East, particularly in Syria and Iran, which add a 15 cent premium to gas costs.
Crude oil has also contributed to more expensive prices at the pump, however, this week prices for the commodity eased significantly. Prices were on target to cross the $97 per barrel mark until mid-week when crude saw two straight days of significant losses, its steepest daily fall so far this year. Crude prices closed below $93 per barrel Thursday, in response to a rise in U.S. crude oil inventories, comments by the U.S. Federal Reserve hinting of an end of its monetary stimulus program, a strengthened U.S. dollar and weak economic data out of the euro zone. Crude oil settled at $93.13 Friday, up 29 cents for the day, yet down 2.8 percent for the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks increased by more than 4 million barrels to 376.4 million barrels. Gasoline stocks fell nearly 3 million barrels to 230.4 million barrels, which is more than a million barrels lower than the same week last year. Total petroleum demand came in at 18.4 million barrels per day (bpd), down sharply from last week’s 19 million bpd, but up slightly from last year’s 18.2 million bpd. Gasoline demand rose 33,000 bpd to 8.437-million bpd. The truly historic number that comes from this report lies in U.S. crude oil production. EIA measured domestic production at 7.118 million bpd, up 54,000 bpd nationally. One has to go back 246 months to Aug. 7, 1992 to find a higher number. After a brief winter lull, the U.S. appears to be on track to see more than 7.5 million bpd of domestic crude production around mid-year.”State and local gas prices continue to rise from coast to coast and the national gas price average jumped double digits this week (14 cents), occurring weeks ahead of the typical late-winter run up in pump prices and at a much faster clip,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “However, while the peak price this spring may approach the 2011 and 2012 highs ($3.98 on May 5 and $3.94 on April 5 and 6, respectively), AAA continues to expect the high to be lower than both years.”
This year’s atypically early skyrocketing gas prices have motorists and analysts alike wondering how high prices will go and when they will begin to retreat. Tom Kloza, chief oil analyst for the Oil Price Information Service (OPIS) and AAA gas price partner, believes the national gas price average will peak at about $3.95 by early April. “Whatever you pay on St. Patrick’s Day will be considerably more than you’ll pay on July 4 or Labor Day,” says Kloza.
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