August 22, 2016|
After Lengthy Slide, Gas Prices Rise Nearing End to Summer Driving Season
Iowa’s average is $2.22
Minnesota’s average is $2.20
National average is $2.16
BURNSVILLE, Mn (August 22, 2016)- Following a streak where the national retail average price of gasoline dropped on 54 of 55 days, pump prices have now increased on 12 of the past 17 days and each of the past six. The national average price for regular unleaded is $2.16 per gallon, which is four cents more than one week ago, but is two cents less than a month ago, 46 cents less than the same date last year, and the lowest price for this date since 2004.
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Pump prices have been driven by crude oil prices surging more than 20 percent this month and refinery issues impacting production in some regions. Higher crude oil prices have come as the U.S. dollar has weakened and the Organization of the Petroleum Exporting Countries (OPEC) is reportedly considering production cuts to bolster prices. West Texas Intermediate crude oil is priced in U.S. dollars. As the U.S. dollar weakens, crude oil becomes relatively less expensive for those holding foreign currencies, which increases demand and puts upward pressure on oil prices. This upward momentum has been further supported by reports that OPEC members will again consider an agreement that would limit production in the face of the global glut of crude oil supplies that has more than halved prices in recent years.
Also influencing gasoline prices have been refinery issues that have exacerbated price increases in areas supplied by these facilities. This includes a number of refineries in the Gulf Coast that are undergoing unplanned maintenance as a result of flooding in Louisiana and refinery fire in Texas. Drivers in the Midwest and Central U.S. continue to see the most dramatic recent price movement as the impact of outages – including the BP refinery in Whiting, Ind. – has pushed prices higher. The facility is reported to be slowly coming back online, which could allow regional prices to drop back down.
While pump prices in the vast majority of states (42) have moved higher over the past week, domestic gasoline supplies remain high and oil prices remain relatively lower compared to recent years, meaning pump prices are likely to remain cheap through the rest of the summer and into the fall. Prices could even dip back below $2.00 per gallon once the summer driving season is complete and as many regions are allowed to transition to selling cheaper-to-produce winter-blend gasoline. However, a major market-moving event, like a hurricane or further increasing crude oil costs, could still offset this decline and temporarily drive pump prices higher.
Great Lakes and Central States
Pump prices in the Great Lakes region continue to be the most volatile in the nation. This is a product of tightening supplies compared to other regions and refinery issues that have limited production at some facilities. While prices in recent weeks have been a mixed bag of increases and decreases, regional prices over the past week have moved universally higher, with Midwestern states filling the top-four increases during this span: Indiana (+10 cents), Kentucky (+10 cents), Michigan (+8 cents), and Ohio (+8 cents). This volatility has been pressured by operations at the BP refinery in Whiting, Ind. (the region’s largest facility), which has been slow to come back on line following production problems.
Prices for drivers in the Central United States remain some of the cheapest in the country, although prices have followed the national average higher over the past week. Three states in the region feature in the top-15 lowest: Tennessee ($1.95), Missouri ($2.01), and Oklahoma ($2.07).
The West Coast features the highest prices in the nation as has consistently been the case over the past decade. However, drivers in these same states are also among the only motorists who have seen state prices drop over the past week and many of these states feature prominently in the ranking of the largest year-over-year discounts, including three of the top four savings in the nation: Alaska (-89 cents), California (-84 cents), and Nevada (-77 cents). While weekly discounts exist in parts of the region, prices in California have moved higher due to an issue at the Valero refinery in Wilmington, Calif. that produces an estimated 87,000 barrels per day when running at capacity. Should this facility be delayed in returning to production, it could reverse the recent declines in other parts of the region.
Pump prices in the Rocky Mountains have remained relatively stable compared to other markets due primarily to the fact that there have been few regional disruptions to production in recent months and their geographic location. Being located in the center of the country helps to insulate the region from coastal price swings. Barring unforeseen production issues, lower prices could be around the corner for drivers in the area with the nearing end to the summer driving season and the transition to winter-blend gasoline in mid-September. The changeover to winter-blend gasoline, which has a higher Reid Vapor Pressure and is cheaper to produce, is allowed to take place in many parts of the country on September 15.
Mid-Atlantic and Northeast
While still largely cheaper than one month ago, prices in the Mid-Atlantic and Northeast have moved higher over the past week due to rising crude oil prices. This has been most evident in the Mid-Atlantic, where three states feature prominently in the top-ten weekly increases in the nation: Delaware (+9 cents), Maryland (+7 cents), and Pennsylvania (+7 cents).
South and Southeast
Drivers across the South and Southeast still make up the bulk of those paying pump prices below $2 per gallon. Despite several recent production issues in the region, seven states still place in the ten cheapest states in the nation: South Carolina, Alabama, Mississippi, Arkansas, Texas, Louisiana, and North Carolina. The U.S. Gulf Coast is the largest refining region in the nation, so even with some recently reported problems, the area is less susceptible to price spikes from limited disruptions.
Oil Market Dynamics
As outlined above, a key contributing factor to the higher retail gas prices has been the increase in crude oil prices in recent weeks. West Texas Intermediate crude oil is still priced much lower than recent years, prices have increased more than 20 percent in August and are trading at the highest level since July 1. This increase has been attributed to a weaker U.S. dollar and reports that OPEC will reconsider production limits by cartel members at its next meeting in Algeria in late September. An agreement on a similar proposal failed at their last meeting, however Ecuador and Venezuela are expected to again call for measures to cut production. If OPEC members agree to limit production, rising crude oil prices could offset or even reverse any expected drop in U.S. pump prices resulting from tapering demand and cheaper seasonal blends. At the close of Friday’s formal trading session on the NYMEX WTI was up 30 cents to settle at $48.52 per barrel.
Drivers can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.
The Auto Club Group (ACG) is the second largest AAA club in North America. ACG and its affiliates provide membership, travel, insurance and financial services offerings to over 9 million members across 11 states and two U.S. territories including Florida, Georgia, Iowa, Michigan, Nebraska, North Dakota, Tennessee, Wisconsin, Puerto Rico and the U.S. Virgin Islands; most of Illinois and Minnesota; and a portion of Indiana. ACG belongs to the national AAA federation with nearly 56 million members in the United States and Canada and whose mission includes protecting and advancing freedom of mobility and improving traffic safety.
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