Gas prices climb to six-month high, AAA re­ports

The Calvert Recorder - Southern Maryland Automotive Trends - - Auto Trends -

Gas prices Mon­day were at their high­est lev­els in more than six months, and the na­tional av­er­age has re­mained above $2 per gal­lon for 40 con­sec­u­tive days.

Mon­day’s av­er­age price of $2.22 rep­re­sents an in­crease of 8 cents per gal­lon on the week, and prices are up 16 cents per gal­lon on the month. Am­ple ga­so­line sup­plies and rel­a­tively lower crude oil costs are help­ing to sus­tain year-over-year sav­ings, with to­day’s price dis­counted by 39 cents per gal­lon ver­sus a year ago.

Ga­so­line de­mand con­tin­ues to break sea­sonal records as low prices mo­ti­vate peo­ple to drive more. Ad­di­tion­ally, crude oil costs are also in­creas­ing and re­cently reached new 2016 highs. In­creased de­mand and more ex­pen­sive oil costs have helped to push gas prices higher in many parts of the coun­try over the past few weeks, and prices may move even higher lead­ing into the busy sum­mer driv­ing sea­son.

The av­er­age price at the pump for the month of April was $2.10 per gal­lon, which is the low­est av­er­age for this month since 2009. Only 20 per­cent of U.S. sta­tions are still sell­ing gas for less than $2 per gal­lon and pump prices are mov­ing due to growth in fuel de­mand, which is up 5.6 per­cent ver­sus a year ago, ac­cord­ing to the lat­est data from the U.S. EIA. Gas prices have in­creased by 52 cents per gal­lon af­ter hit­ting a 2016 low in mid-Fe­bru­ary.

Four states are post­ing av­er­ages be­low $2 per gal­lon, which is nine fewer states than last week’s re­port. Re­tail av­er­ages have his­tor­i­cally fluc­tu­ated dur­ing this time of year, and al­though the over­all price at the pump is be­gin­ning to trend higher, gas prices dur­ing this year’s sum­mer driv­ing should re­main no­tice­ably dis­counted in com­par­i­son to pre­vi­ous years.

The na­tional av­er­age price of diesel has been cheaper than ga­so­line for the past five days, and diesel may re­main less ex­pen­sive than ga­so­line for the re­main­der of the sum­mer. In re­cent years it has been rare for diesel to be cheaper than ga­so­line. The last time the na­tional av­er­age price of diesel was less than ga­so­line for a sig­nif­i­cant pe­riod was in the sum­mer of 2009, when the av­er­age was cheaper for 48 days in a row. It is pos­si­ble that diesel will re­main cheaper than ga­so­line for the next 3-4 months due to abun­dant sup­plies and sea­sonal fac­tors im­pact­ing both ga­so­line and diesel.

Con­sumer at­ti­tudes

The lower price en­vi­ron­ment for gas prices has not only led to driv­ers tak­ing to the roads at record lev­els, but is also shift­ing at­ti­tudes about var­i­ous price points. At­ti­tudes to­wards gas prices have changed sig­nif­i­cantly over the past few years, ac­cord­ing to a new sur­vey by AAA:

• Half of U.S. driv­ers now be­lieve gas is “too high” at $2.50 per gal­lon. This fig­ure has dropped sig­nif­i­cantly in re­la­tion­ship to the price of gas. As re­cently as 2014, half of Amer­i­cans be­lieved gas was “too high” at $3.30 per gal­lon, while last year half of Amer­i­cans be­lieved it was “too high” at $3 per gal­lon. Only nine per­cent of U.S. sta­tions are sell­ing gas for more than $2.50 per gal­lon to­day.

• More than 35 per­cent of Amer­i­cans be­lieve that gas is “too high” based on to­day’s av­er­age price, even though gas prices are at the low­est lev­els since 2009. The vast ma­jor­ity of Amer­i­cans also do not be­lieve that gas is “cheap” to­day.

West Coast

Gas prices on the West Coast re­main some of the high­est in the na­tion, led by Cal­i­for­nia ($2.80) and Hawaii ($2.58), which are the only two states with av­er­ages above $2.50 per gal­lon. Re­gional neigh­bors Ne­vada ($2.48), Alaska ($2.42) and Washington ($2.42) join in the rank­ings as the top five most ex­pen­sive mar­kets. Six out of 10 of the na­tion’s top 10 most ex­pen­sive re­tail mar­kets are lo­cated in this re­gion.

Re­fin­ery op­er­a­tions in Cal­i­for­nia are de­scribed as rel­a­tively healthy com­pared to a year ago, and ga­so­line pro­duc­tion on the West Coast is re­port­edly at a seven-month high. The mar­ket ap­pears to be well sup­plied with prod­uct, and bar­ring any un­ex­pected dis­rup­tions in sup­ply, gas prices in the re­gion should hold rel­a­tively steady. Driv­ers in the re­gion have ben­e­fit­ted from a sur­plus in ga­so­line sup­ply ver­sus one year ago, which has con­trib­uted to no­tice­able sav­ings at the pump year-over-year. A to­tal of five states na­tion­wide are post­ing yearly dis­counts of more than 50 cents per gal­lon, all lo­cated within this re­gion: Cal­i­for­nia (-88 cents), Alaska (-68 cents), Ne­vada (-66 cents), Hawaii (-61 cents), Ore­gon (-59 cents).

ExxonMo­bil’s Tor­rance, Calif., re­fin­ery is still in the process of restart­ing ga­so­line pro­duc­tion, and is ex­pected to be fully on­line in May. This re­fin­ery pro­duces ap­prox­i­mately 10 per­cent of all ga­so­line sold in Cal­i­for­nia and when it went off­line in Fe­bru­ary of 2015 due to an ex­plo­sion, prices to spiked in the re­gion.

Mid­west

Prices in the Mid­west con­tinue to swing sig­nif­i­cantly due to move­ments in sup­ply and de­mand. Re­tail av­er­ages are up dou­ble dig­its on the week in the Mid­west­ern states of Michi­gan (+13 cents), Ohio (+13 cents), In­di­ana (+11 cents) and Illi­nois (+10 cents). Some of the largest jumps in gas prices month-over-month are also seen in the re­gion, and av­er­ages are up by more than a quar­ter per gal­lon in Illi­nois (+29 cents), In­di­ana (+28 cents), Ohio (+28 cents) on the month.

De­spite this trend of weekly and monthly in­creases, this re­gion is also home to some of na­tion’s least ex­pen­sive mar­kets for re­tail ga­so­line: Oklahoma ($1.96), Mis­souri ($1.99) and Kansas ($1.99). Crude oil sup­ply is re­port­edly build­ing in the re­gion and re­finer­ies are con­tin­u­ing to re­turn to pro­duc­tion fol­low­ing the spring main­te­nance sea­son. The re­fin­ery uti­liza­tion rate in the re­gion is in­creas­ing, which should help sta­bi­lize the price at the pump, bar­ring any un­ex­pected dis­rup­tions in sup­ply.

Oil mar­ket dy­nam­ics

Oil is the largest cost as­so­ci­ated with pro­duc­ing ga­so­line, and ev­ery $1 change can in­crease gas prices by as much as 2.4 cents per gal­lon. The cost of crude has in­creased by ap­prox­i­mately $10 per bar­rel since the be­gin­ning of April, at­trib­uted to in­ter­rup­tions in global sup­ply and the ex­pec­ta­tion that de­mand will rise in the com­ing months.

De­spite fall­ing U.S. rig counts and weekly de­creases in U.S. pro­duc­tion, the do­mes­tic crude oil mar­ket re­mains well sup­plied. The lat­est data from the U.S. EIA shows an in­crease in both crude oil in­ven­to­ries and ga­so­line in­ven­to­ries, which should help off­set grow­ing de­mand and keep pump prices rel­a­tively low.

A weak­en­ing U.S. dol­lar and ex­pec­ta­tions that the Fed will in­crease in­ter­est rates is sup­port­ing spec­u­la­tions that the global oil mar­ket will be­gin to come into bal­ance sooner than ex­pected. Geopo­lit­i­cal fac­tors are also likely to in­flu­ence the mar­ket in the near team, and at­ten­tion re­mains fo­cused on both OPEC and non-OPEC pro­duc­tion based on the cur­rent glut in global sup­ply.

WTI reached its high­est price for 2016 the last week in April as talks of a weak­en­ing U.S. dol­lar, in­creased de­mand and fall­ing out­put sur­faced. How­ever, this boost in price was short lived and re­ports of in­creased pro­duc­tion out of OPEC pushed prices lower to close out the week. At the close of Fri­day’s for­mal trad­ing ses­sion on the NYMEX, WTI was down 11 cents and set­tled at $45.92 per bar­rel.

PHOTO COUR­TESY OF AAA

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