Jump at the pump
Drivers see fuel increases of up to 25 cents at some stations
What caused a sudden and unexpected leap in gas prices?
Just as NFL playoff predictions can be wildly off (sorry, Falcons and Steelers fans), so can projections about gasoline prices.
The average price for a gallon of unleaded regular in Florida jumped 5 cents overnight — from $2.45 on Monday to $2.50 on Tuesday. Motorists in some areas of South Florida were startled to see prices at their local stations rise as much as 25 cents per gallon overnight.
This wasn’t supposed to happen, according to market watchers.
In its weekly gas price update a week ago, travel club AAA said the annual post-New Year’s Day slowdown in consumer demand would likely push prices down 5 cents to 15 cents over the next six weeks before rising sharply in the spring.
But on Tuesday, AAA said prices at the pump face upward pressure and could jump 5 cents to 10 cents per gallon thanks to rising crude oil prices and reduced U.S. crude oil production.
How could the outlook have changed so quickly?
Apparently, AAA’s earlier projection didn’t anticipate the $2 rise in crude oil prices last week. A barrel of WTI crude closed at $64.30 Friday on the New York Mercantile Exchange, the fourth straight week of gains.
Since mid-December, the perbarrel price has increased $7, a surprising development considering the price remained below $60 throughout 2017 despite production cuts by OPEC nations.
Plus, oil supplies tightened in the United States as domestic production dropped by 290,000 barrels per day — the largest U.S. production drop since mid-October. Crude oil inventories in the United States dropped by 4.9 million gallons, which encouraged traders that oil prices could continue to climb, AAA said this week.
Also, last week’s report from the U.S. Energy Information Administration showed that consumer demand for gasoline actually increased when it was expected to fall. The combination of market factors triggered an 8-cent rise in wholesale petroleum prices.
Energy traders don’t care about seasonal trends, AAA spokesman Mark Jenkins said. “There were a lot of people in the industry who believed that oil prices were in-
flated and expected them to decline. That has yet to happen. So while pump prices were indeed poised to decline, based on seasonal fundamentals like supplies, the constant upward pressure of oil prices finally caused pump prices to buckle.”
On the other hand — and there’s always an other hand in energy price projections — a report that U.S. oil producers are poised to take advantage of the higher crude prices by activating 10 new drilling rigs foretells an increase in production that would lead to higher inventories, to decreases in crude oil prices and ultimately, to stabilized or lower prices at the pump.
In South Florida, where the higher cost of doing business keeps gas prices higher, a gallon of unleaded regular averaged $2.55 in Broward and Miami-Dade counties and $2.62 in Palm Beach County.
The price-comparison website and app GasBuddy.com showed gas remained available under $2.30 at a handful of stations throughout the area, while the number of stations that have raised prices over $2.50 have increased sharply.