Motorists should brace themselves for even higher gas prices in the days ahead, with increases in the range of 10-20 cents per gallon resulting from the extreme cold weather.
According to analysis from GasBuddy, 11 refineries in Texas and one in Kansas have at least partially shut due to the extremely cold weather. Refineries are exposed to the elements, and unlike facilities in the northern U.S. which are prepared for cold weather, few refineries in the South have protection from these historically low temperatures.
GasBuddy calculations show 3.48 million barrels of refining capacity were offline as of midday Tuesday, or nearly 20 percent of total U.S. refining capacity, just under the amount shut down due to Hurricane Harvey in 2017.
Every day that these refineries are not operating, the country is consuming more gasoline than it produces, swiftly impacting inventories.
“The quicker the affected refineries are able to come back online, the better, and perhaps less painful for motorists than if they remain out of service for even longer,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Oil prices have continued to rally as global oil demand recovers from the worst of the COVID-19 pandemic, and now the extreme cold weather shutting refineries down, us motorists just can’t seem to catch a break. We probably won’t see much, if any relief, anytime soon.”
GasBuddy is projecting the current national average of $2.54 per gallon rising to as much as $2.75 per gallon in the next two weeks.
That would be the highest level for gas prices since 2019, and the highest seasonal level since 2016.
“Expect gas prices to rise more closer to the markets these refineries serve, primarily Texas, Louisiana, Alabama, Mississippi, Florida, Georgia, the Carolinas, and potentially even up the coast, as the Colonial pipeline carries refined products from the affected refineries as far as New Jersey. While other regions are also likely to see impacts to gas prices, the amount may be slightly less,” De Haan said.
“Even after this event is over, it may take refineries days or even a week or two to fully return to service, and with gasoline demand likely to accelerate as we approach March and April, the price increases may not quickly fade.”
GasBuddy expects the national average could rise closer to $3 per gallon closer to Memorial Day weekend as refineries eventually begin to switch over to EPA-mandated cleaner summer fuels.
While a $3/gallon national average is far from guaranteed, the odds are certainly rising. The market could get doused in cold water, however, should OPEC, which controls a third of global oil production, raise production in the weeks or months ahead.
For more information, visit www.gasbuddy.com.
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