Gas prices have skyrocketed in the past week, jumping double-digits in more areas of the country — including the Mid-Atlantic. This uncharacteristically early price jump is due to several factors including a rise in crude oil prices and some refineries either closing permanently (the Hess refinery in Woodbridge, NJ) or shutting down for maintenance (such as Philadelphia Energy Solutions’ refinery in Philadelphia, PA). The national average price for a gallon of regular unleaded gasoline jumped 11 cents this week to $3.57 Friday, 27 cents more than last month and 8 cents more than the price one year ago. Prices at the pump skyrocketed 24 cents in the past two weeks, two of the most dramatic weeks for gas price spikes in nearly two years.
Analysts say gas prices are going up for two basic reasons: oil prices are rising, and refineries are shutting down. When crude oil prices rise, gasoline prices follow suit. Improving economic data in the U.S. and abroad, in both Europe and China, have pushed up demand and, in turn, crude oil prices. Oil prices have jumped 10 percent over the last two months. The price of crude accounts for 68 percent of the cost of a gallon of gas, according to the Energy Information Administration (EIA). Prices at the pump typically rise each year in late winter due to temporary refinery shutdowns for maintenance and refiners’ preparations to switch to summer blends of gasoline, which will happen in March. Crude oil closed at $95.72 Friday, up 2 percent on the week.
In its weekly report, the EIA data showed crude stocks rose 2.6-million barrels (within expectations) pushing inventories to 371.7-million barrels, despite a late-January import figure that was lower than we’ve seen since 2000. Imports of crude totaled just 7.569 million barrels per day (bpd) last week, the lowest January number in 13 years. As recently as 2007, we saw January weeks where traders brought in more than 11 million bpd of crude. Gasoline stocks rose by 1.7-million barrels to 234-million barrels (also within expectations). Gasoline demand eased 86,000 barrels to 8.415-million (bpd).
Also this week, the EIA released data that showed (estimated) gasoline expenditures in 2012 for the average U.S. household reached $2,912, or just under 4 percent of income before taxes, according to EIA estimates. This was the highest estimated percentage of household income spent on gasoline in nearly three decades, with the exception of 2008, when the average household spent a similar amount. Although overall gasoline consumption has decreased in recent years, a rise in average gasoline prices has led to higher overall household gasoline expenditures.
“Gas prices continue to skyrocket well ahead of the seasonal upswing typically seen in late-February into March, jumping double-digits in most areas of the country,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Double-digit weekly gains as a result of temporary refinery shut downs and increased crude oil prices, set the stage for motorists to see seasonal peak prices at the pump much sooner than expected. Last year, the national average gas price peaked at $3.94 per gallon in early April, a price point that could be matched again this year.”
Pain at the pump is expected to continue through February and March. Gas prices could close in on the $3.75 to $4.00 per gallon averages, the range that represents the season’s peaks in both 2011 and 2012, according to Tom Kloza, chief oil analyst for the Oil Price Information Service (OPIS) and AAA gas price partner. Beyond this seasonal peak, average prices for the whole year are expected to be lower. Kloza is predicting a national average of $3.25 to $3.50 a gallon, which could be substantially lower than last year’s average of $3.60 — which caused U.S. motorists to spend a record $479 billion at the pump.
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