Thursday, 08 June 2017 18:39

Gas Prices Keep Rising to Closeout Summer Driving Season

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After dropping for two months, including a streak of 53 of 54 days, pump prices are again on the rise heading into Labor Day weekend. The national average price for regular unleaded gasoline has increased for 14 consecutive days. Today’s average price of $2.22 per gallon marks an increase of six cents per gallon compared to one week ago and eight cents per gallon compared to one month ago. Despite the increase, drivers are paying 27 cents less than they did at this same time last year and are on track to pay the lowest Labor Day gas prices since 2004.
According to a AAA survey, 55 percent of Americans say they are more likely to take a road trip this year due to lower gas prices. OPIS projects that Americans will purchase about 400-million gallons of gasoline each day over Labor Day weekend, at an aggregate cost of about $880-million per day. While the national year-over-year discount remains, it has closed substantially from more than fifty cents just ten days ago.

A number of factors have been driving prices higher for motorists including: higher crude oil prices, refinery issues in the Gulf Coast, and the threat of a tropical weather system moving into the Gulf of Mexico. The rising crude oil prices can be attributed, in part, to talks of an agreement to limit production amongst OPEC countries and news from the U.S. Federal Reserve that the U.S. may raise interest rates in the next couple of months.

While Midwest prices have often been the most volatile in the nation in recent years, prices in Southern and East Coast states over the last week have headlined the list of biggest movers. This has been largely tied to refinery issues in the Gulf Coast including flooding at the Baton Rogue Exxon Mobil and Covent facilities and a refinery outage in Baytown, Texas, which have pressured prices higher in areas supplied by these facilities. Meanwhile, the first major tropical depression moved through the Straits of Florida, the area between Cuba and the Florida Keys, Sunday evening. While the storm’s direction and strength are still uncertain, many meteorologists are tracking the storm’s path into the Gulf of Mexico with a northern bend into Florida later in the week. The storm’s projected move away from the concentration of refineries and petroleum infrastructure in the Gulf Coast is easing worries about available supply.
 
Quick stats:
Gas prices in three states are below $2.00 per gallon, six fewer than one week ago: South Carolina ($1.95), Alabama ($1.98) and Mississippi ($1.996).
States around the country have seen volatility in gas prices including drivers in the Great Lakes region, the Rockies, central and southern states. The biggest weekly increases in price are seen in Florida (+13 cents), Tennessee (+9 cents), Georgia (+9 cents), Missouri (+8 cents), Kansas (+8 cents), North Carolina (+8 cents), South Carolina (+8 cents), Colorado (+8 cents), Michigan (+7 cents) and Illinois (+7 cents).

West Coast
Prices on the West Coast remain the most expensive in the nation, including the top five most expensive state averages: Hawaii ($2.74), California ($2.68), Washington ($2.61), Alaska ($2.55), Oregon ($2.46). While prices in the region have followed the national average trending higher, they have been some of the smallest increases in the country. Drivers in the area are also enjoying the largest yearly discounts compared to the same date last year, but issues at a refinery in Carson, California on Friday have the potential to impact supply in the region heading into the Labor Day weekend.

Rockies
Drivers in the Rockies are also enjoying yearly discounts with Colorado (-58 cents), Wyoming (-53 cents), Utah (-51 cents), Arizona (-50 cents) and New Mexico (-46 cents) all in the top ten largest discounts in the country. Prices in the region are often geographically insulated from pump price movement tied to global crude oil prices and have generally been among the more stable in the nation over the past month. Regional prices may drop this fall as seasonal effects like decreased demand and the switchover to cheaper-to-produce winter-blend gasoline take effect.
 
Great Lakes and Central States
Volatility remains the norm in the Great Lakes and the top five monthly price increases in the nation are all in this area, tied in large part to a refinery issue at the largest refinery in the region, the 430,000 barrel per day BP facility in Whiting, Indiana. These top monthly increases are Michigan (+22 cents), Illinois (+19 cents), Minnesota (+19 cents), Missouri (+17 cents) and Oklahoma (+17 cents). While prices jumped as a result of the issue at the Whiting refinery, reports are that the issue has been resolved and that the refinery is back to normal production as of last week. While lower than their Great Lakes neighbors, no state in the Central region currently boasts an average that is less than $2.00 per gallon. As of one month ago, four Central states were below the $2 threshold: Kentucky ($1.99), Oklahoma ($1.95), Missouri ($1.93) and Tennessee ($1.90).
 
Mid-Atlantic and Northeast
Gas prices in much of the Mid-Atlantic and Northeast have been relatively flat over the past month, even as prices nationally have been on the rise. Barring any unexpected impact to production or distribution, prices in the region may continue to drop as the summer driving season ends, decreasing demand and the switch to cheaper winter-blend fuel being allowed in mid-September.
 
South and Southeast
States in the Gulf Coast and Southeast regions are seeing some of the biggest increases in the nation over the past week as market watchers tracked a slow-moving tropical wave with some concern that it could materialize into a storm with potential to impact production at refineries on the Gulf of Mexico and demand by drivers in the region. The current forecast predicts the storm surge will potentially reach the Florida coast north of Tampa on Thursday. The Gulf Coast is home to the largest concentration of refineries in the nation and storms that hit these facilities can disrupt operations and send prices higher for states east of the Rockies.

Oil Market Dynamics
West Texas Intermediate oil prices briefly fell below $40 per barrel in July, but have turned higher in August. Prices retreated slightly last week from their recent high of $48.52 set on August 19, but remain more than 10% higher than one month ago. Market watchers will continue to monitor possible interest rate increases by the U.S. Federal Reserve and any signs that the Organization of Petroleum Exporting Countries may consider an agreement that would limit production in an effort to influence prices higher. Members of OPEC are due to meet informally in Algeria on Sept. 26-28 on the sidelines of the International Energy Forum. There are few expectations of any real meaningful agreement and the market may not see any changes impacting the cost of crude oil until the meeting has commenced. At Friday’s close of formal trading on the NYMEX, WTI was up 31 cents to settle at $47.64 per barrel.

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