U.S. gasoline prices are ticking up after a roughly 100-day decline, threatening to inflict new pain on consumers who have been grappling with widespread inflation for more than a year.
Maintenance at fuel-making plants, more demand for gasoline and tight fuel supplies have contributed to a 14-day run of increasing gasoline prices. A gallon of regular averaged about $3.831 on Wednesday, according to OPIS, an energy-data firm that is part of Dow Jones & Co., publisher of The Wall Street Journal.
A decision by the Organization of the Petroleum Exporting Countries and its Russia-led allies Wednesday to cut oil production by 2 million barrels a day will further elevate prices, say analysts. The White House, calling the decision shortsighted, said it would explore measures to protect U.S. consumers.
Analysts don’t expect most drivers to have to contend with $5 gasoline as they did in June, in part because demand typically shrinks during the winter season. Still, prices are abnormally high for this time of the year, which is when refiners switch to producing winter-grade fuel blended with butane, resulting in lower production costs and cheaper fuel, said
head of global oil analytics at S&P Global Platts.
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The rise in gasoline prices comes weeks before November’s midterm elections. The Biden administration has made efforts to reduce consumers’ energy costs a priority. It has released millions of barrels of oil from the Strategic Petroleum Reserve, called on oil companies to produce more oil and fuel and, in recent days, hinted it could curtail exports of refined petroleum products.
But some of the key drivers behind rising gasoline prices are beyond the administration’s control, according to analysts. Scheduled and unplanned maintenance at refineries from Ohio to Washington have factored in a roughly 4% increase in average gasoline price in the past two weeks, analysts said. U.S. oil refiners on average used about 91.6% of their total fuel-making capacity in September, down from about 93% in August, according to the Energy Information Administration.
The downtime has further reduced an already shrinking production capacity. Since 2020, about 3 million barrels a day of global refining capacity has been shut permanently, including about 1 million in the U.S., according to the EIA. Gasoline inventories in the U.S. last week were down about 8% from a year earlier, at their lowest level since 2014.
Demand for the fuel has also increased slightly recently, putting additional strain on the tight supply, analysts said. Drivers consumed 8.77 million barrels of oil a day last week, about 2% more than the previous week, according to the EIA.
Prices vary widely across the country, due in part to planned maintenance and unplanned outages at refineries in certain regions. While retail gasoline prices in more than 20 states, mainly in the South and the Northeast, were under $3.50 a gallon on Wednesday, according to AAA, they reached $4.176 in Indiana and $6.425 in California.
In September, outages at plants run by
Marathon Petroleum Corp.
on the West Coast coincided with scheduled maintenance at
Valero Energy Corp.
refineries in the region, analysts said, reducing the output of petroleum products. California’s stringent blending specifications also limited the state’s foreign imports, further contributing to increased prices, said
an analyst at Tudor, Pickering, Holt & Co.
Last week, California Gov.
called for a windfall tax on “greedy oil companies” he said had “jacked up prices at the pump.” He directed the California Air Resources Board to make an early transition to winter-blend gasoline, which he said would increase oil supplies by up to 10% and decrease prices.
PLC last month shut down a refinery with a processing capacity of 160,000 barrels of crude oil a day after two employees died in a fire. That fire came on the heels of one at a 440,000-barrel-a-day BP refinery in Indiana.
The price of oil, the primary input for gasoline, is also having an impact. Brent, the global benchmark, rose more than 2% to $93.90 on Wednesday. Exports of U.S. crude oil, OPEC+’s production cuts and limited capacity for additional releases from the Strategic Petroleum Reserve have essentially backstopped global oil prices from falling below $80 per barrel, putting a floor on domestic gasoline prices, said
a director at research firm Capital Alpha Partners. “You don’t see these stresses fading away tomorrow,” he said.
Dan Lukasavitz, who runs a BP-branded gas station in Dayton, Ohio, said he recently raised his price 70 cents a gallon to $3.99 to prepare for a rise in oil prices he expects after OPEC’s move. “The cost of everything is just going to trickle on down to consumers,” he said.
Write to Benoît Morenne at [email protected]
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