Back to reality: Gas prices up double digits

The national average price for regular unleaded gasoline has increased every day for nearly three weeks for a total of 20 cents per gallon. Gas prices had previously dropped for a record 123 consecutive days before beginning to rise again on January 27. Friday’s national average price of $2.24 per gallon is seven cents more than one week ago and 12 cents more than one month ago, yet remain $1.09 below one year ago.  While prices have moved higher recently, the national average remains significantly below the price one year ago when U.S. motorists were paying $1.10 more per gallon on average to refuel their vehicles.

An oversupplied global market is expected to keep the price of crude relatively low for at least the first half of 2015.  Nonetheless, the global market’s overall volatility is at a six-year high and prices have seesawed, often daily, in response to a number of factors that are putting pressure on the balance between supply and demand.  High-cost production countries continue to reassess their overall production goals, and Saudi Arabia is currently maneuvering to protect its market share by adjusting prices to various countries, including Asia and the United States.  The past week crude oil has traded between the high $40s and low $50s per barrel, reflecting the global market’s volatility.  At the close of Friday’s formal trading on the NYMEX, crude oil settled at $52.78 per barrel, up two percent on the week.

There is additional market uncertainty this week because approximately 5,200 members of the United Steelworkers union have walked off their jobs at refineries and chemical plants responsible for processing more than 10 percent of U.S. petroleum products. While this is the first nationwide strike at U.S. oil refineries since 1980, the work stoppage is not expected to have a significant impact on production in the short-term because refineries continue to operate. News of the strike has reportedly led to higher wholesale gasoline prices.

The Energy Information Administration (EIA) noted in its weekly report that crude oil inventories saw a sizable 4.9 million barrel build, reaching 417.9 million barrels, the highest level in decades.  Although 2015 is only five weeks old, every week has seen a build, with crude stocks jumping more than 35 million barrels, and quickly approaching the record levels of 25 years ago.  Gasoline stocks saw a 2 million barrel build, to 242.6 million barrels.  U.S. gasoline demand declined to just 8.282 million barrels per day (bpd) last week, representing the lowest weekly figure since the week ending Feb. 14, 2014.  Cheap gasoline prices were not enough of a factor to overcome inclement weather across a many of the northern states.

“Crude oil has jumped more than $8.00 since hitting $44.45 per barrel on Jan. 28. That is what’s driving this train,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “Another influencer is the supply of gasoline, which has tightened somewhat lately as refineries ramp down to do their spring dance of converting to the production of summer-grade fuels. Motorists are likely to see the upward price trend continue for the foreseeable future as a result of these factors.”

February typically marks the state of the seasonal refinery maintenance in preparation for the busy summer driving season.  Refineries usually schedule maintenance during the first several months of the year when demand is relatively low, which can lead to decreased production and supplies.  It is not uncommon for gas prices to increase 30-50 cents per gallon between early February and the middle of spring.

CURRENT AND PAST GAS PRICE AVERAGES

Regular Unleaded Gasoline (*indicates record high)