Oil prices, hurricane drive up gasoline costs

Gasoline prices typically drop in the fall, but this year they have continued to rise even as temperatures have cooled.

The price at the pump is driven primarily by three factors: the price of oil, the cost of refining the oil into gasoline and the availability of gasoline.

The second and third factors generally decline this time of year as refiners switch to lessexpensive winter-blend fuels and driving slows, drawing down demand for gasoline. But over the past few months, oil prices have surged, outpacing declines in the other two primary factors for gasoline prices.

“The national average gas price has broken out of a well-established rut, climbing above $2.90 per gallon for the first time since mid-June on rising oil prices ahead of the reinstatement of sanctions against Iran and OPEC failing to pump enough oil to meet robust demand,” Patrick DeHaan, head of petroleum analysis for GasBuddy, wrote this week on the GasBuddy blog.

“We may see prices continue to lift ahead of the midterms, however completely unrelated to the elections, but due to constant threats from an improving economy: higher demand and lower supply is tipping the balance of the oil market and pushing prices higher.”

The average price for a gallon of gasoline in Oklahoma City was almost $2.68 on Thursday, down 3.5 cents over the past week, but up 8.1 cents over the past month, according to AAA. The price is almost 50 cents more than one year ago.

Nationwide, Thursday’s average price was $2.91, unchanged over the past week, but up 6.7 cents over the past month. The price is 43 cents more than one year ago.

With less-expensive gasoline blends and slowing seasonal demand, the oil price is likely to continue as the biggest factor in the price of gasoline over the next few weeks and months.

Global oil prices have increased over the past two months largely because of declining production in Venezuela and other parts of the world and because of concerns that renewed U.S. sanctions on Iran could cause production to further slow. Those new sanctions are scheduled to begin next month.

At the same time, U.S. production has continued to soar, growing to more than 11 million barrels per day. Hurricane Michael, however, caused at least a temporary slowdown.

Offshore oil production in the Gulf of Mexico dropped by 42 percent, or 719,000 barrels a day, on Wednesday as Michael barreled toward Florida. The cut represents an almost 7 percent reduction in total U.S. oil production.

The storm’s effect is likely to be shortterm. Michael stayed east of the gulf’s most active production areas, and most of the activity likely will return to service within a few days.

Despite the uncertainty, oil prices have tumbled over the past two days along with the broader U.S. stock markets, settling Thursday at $70.97 a barrel, down $3.97, or 5.3 percent over the past two days.