Surprise: Gas prices spike to within pennies of 2012 highs

Gas prices typically stabilize and begin to fall by mid-September, but this year has been anything but typical.  The national average price for a gallon of regular self-serve gasoline jumped five cents in the past week to $3.87 per gallon Friday.

This price is 16 cents more than one month ago, 24 cents more than year ago prices and 24 cents below the record high of $4.11 set in July 2008.  The sharp rise in gasoline costs last month, 13.6 percent, drove up wholesale prices by the most since June 2009.

Crude oil prices soared to four-month highs due to a series of factors, both domestic and international.  The Federal Reserve announced another stimulus move to jump start a struggling U.S. economy, boosting crude prices just shy of the $100 mark Thursday.  Internationally, geopolitical tensions escalated in the Middle East following the killing of U.S. ambassador to Libya, J. Christopher Stevens.  In addition, Germany’s top court approved the eurozone’s bailout fund and fiscal pact, causing the euro to gain momentum and subsequently pressured the U.S. dollar downward.  Crude oil closed the week at $99.00 on Friday, up nearly 3 percent on the week.

This rare September jump in prices was also fueled by a “perfect storm” of refining issues – two major Midwest refineries are being upgraded to handle heavy Canadian crude oil and will require partial shutdowns over the next few months; oil companies in the Gulf of Mexico have been slow to restart after shutting down for Hurricane Isaac, the impact of which is now being felt at the pumps.

The switch to winter-blended gasoline, although less expensive, creates a short-term hiccup in prices as refineries partially shut down to make the switch and/or do maintenance work; the requirement for summer-blended gasoline expires this weekend (September 15), so prices are likely to drop in the second half of September.

Energy Information Administration (EIA) data released this week showed U.S. crude oil stocks rose by just under 2.0 million barrels to 359.1-million barrels, which was in line with expectations.  Gasoline stocks fell by 1.2-million barrels to 197.7 million barrels.  Gasoline demand slid 482,000 barrels to 8.695 million barrels per day (bpd), a sign that the late summer jump in gasoline consumption will not be sustained through the autumn weeks ahead.

“We’re seeing the highest (or close to) gas prices of the season this week in a rare September upswing,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic.  “However, experts believe this ‘last hurrah’ will be short lived.  AAA expects prices at the pump will begin to decline midway through September and continue for the last few months of the year as demand decreases and the switch to less expensive winter-blended gasoline begins, bringing much needed relief for motorists.”

The requirement on summer-blended gasoline expired September 15th, therefore gas stations can now begin selling the less-expensive seasonal blend.  AAA Mid-Atlantic expects gas prices will decline in the coming weeks, beginning with this week’s switch over to winter-blended gasoline.  Although this will likely ease prices, other domestic and international factors should be closely followed as they can certainly impact crude oil and gasoline prices, in particular, increased tensions in the Middle East and North Africa.