Motorists across the country are experiencing sticker shock as they fill up at the gas pump. The national average price for regular unleaded gasoline rose to $3.67 per gallon Friday, a 12-cent jump in the past week. This current price is seven cents more expensive than one month ago and 23 cents more expensive than the same day last year. The national average has now increased for 12 days in a row, but remains 12 cents lower than the peak price this year of $3.79 on February 27. While motorists across the country are feeling the squeeze of rising pump prices, the national average is still 44 cents below the all-time daily high of $4.11 per gallon on July 17, 2008. Pending an unforeseen development(s), it seems likely that consumers will face increased retail prices in the coming weeks.
Gas prices appear to have hit a summer-low of $3.47 on July 7, near the same date as the seasonal low price in recent years. In 2011 the national average bottomed at $3.54 per gallon on June 30. In 2012 it reached as low as $3.33 on July 2. The national average rose 17 cents per gallon in July 2011 and 16 cents in July 2012. The price this year has already jumped 12 cents in the first 15 days of July.
Recent gas price increases are attributable to higher global crude oil prices. U.S. crude oil prices have jumped 17 percent in four weeks, trading upwards of $108 per barrel by week’s end (the highest level in 16 months). Several factors have contributed to oil’s surge — reported production issues at North American refineries (in both Canada and the U.S.), continued tension in Egypt and the Middle East, a drop in U.S. inventories (signaling stronger demand), and positive U.S. unemployment and factory data. Crude oil settled at $108.05 at Friday’s close, up nearly two percent on the week.
In its weekly report, the Energy Information Administration (EIA) data showed crude oil stocks saw a 6.9 million barrel draw that put total inventory at 367 million barrels. Inventories are now 10.4 million barrels below last year, but they are 15.3 million barrels above 2011 numbers. The drop did not surprise many, as there were multiple issues on crude pipelines stemming from Canada. Gasoline stocks rose 3.1 million barrels to 224.1 million barrels. Gasoline demand plunged to just 8.729 million barrels per day (bpd), but this period of July has a recent history of demand “hiccups.” The four-week average demand level is a brisk 9.054 million bpd, compared with 8.848 million bpd last year. All indications suggest that 2013 presents a reversal of the 2012 summer in that this season is front-end loaded, whereas last year saw demand peak in August.
“Motorists are undoubtedly in ‘sticker shock’ this week as prices at the pump have jumped double-digits in the past week,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Higher gas prices can be attributed to higher crude oil prices due to several factors – unrest in Egypt that could threaten the Suez Canal, production outages and disruptions in Libya, Iraq and Nigeria, as well as increased demand due to summer vacationers depleting U.S. crude inventories. Experts believe gas prices will range from $3.45 to $3.75 per gallon this summer, with the high end of that range quickly approaching and perhaps topping the 2013 peak price of $3.79 per gallon reached back in February.”
A “perfect storm,” of sorts, continues to influence gas prices – higher wholesale gasoline prices and a jump in crude oil prices, coupled with geopolitical concerns in Egypt and an unusually large drop in U.S. crude inventories over the last three weeks – which are expected to continue their upward trend in the week ahead. In addition, there is industry buzz that the Irving Oil refinery in St. John, New Brunswick, Canada, might need to shut down for unscheduled maintenance. That could send gas prices higher in the U.S, as the refinery is one of the ten largest in North America. In addition, if a hurricane threatens or shuts down refining capacity along the U.S. Gulf Coast, prices could quickly rise across the country.
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