The price of gasoline is expected to rise this spring. Although gasoline supplies in the United States have increased for the last five weeks in a row, some motorists are expected to pay $4 a gallon or more per gallon on average in the upcoming months..
According to Patrick De Haan, head of petroleum analysis at GasBuddy, the current situation is “the calm before the storm.”
“Every month from March through May will see increases ranging from 10-cents to 25-cents per gallon,” which would put the national average in the range of $4 a gallon by Memorial Day, which falls in May.
De Haan believes there is a good chance that the national average will reach $4, which would mean that areas of California — the state that frequently pays the most — could “easily hit $5 a gallon,” if the national average were to reach $4.
According to the travel and navigation app GasBuddy, the average price for regular unleaded gasoline was $3.469 per gallon as of Friday morning (local time). That represents a slight increase over the previous year’s average price of $1.
According to GasBuddy data, the highest recorded national average is $4.103, which occurred on July 16, 2008. According to the latest data from California, the average was $4.656 on Friday morning, not far from the state’s highest recorded average, which was $4.746 on November 23 of last year.
Gasoline prices have been rising for five weeks in a row nationwide, “albeit at a slow but steady pace, as omicron fears have subsided and geopolitical threats have emerged,” according to De Haan. “Omicron fears have subsided and geopolitical threats have emerged,” he added.
“Gasoline demand appears to be weak,” which is not unusual for this time of year, he said, adding that this is contributing to the rise in gasoline inventories, according to MarketWatch.
According to data from the Energy Information Administration, motor gasoline supplies in the United States increased by 2.1 million barrels for the week ended January 28, marking the fuel’s fifth consecutive weekly increase.
However, gasoline stockpiles have a “shelf life” and will be depleted by April, according to De Haan, and total gasoline inventories are just below their five-year average, which is “right on par with normal builds and weak demand,” he explained.
The Energy Information Administration reported last week that motor gasoline supplies were approximately 2 percent below the five-year average for this time of year.
The Oil Price Information Service’s Tom Kloza, global head of energy analysis, however, believes that there are several reasons to believe that “many U.S. motorists will face the highest prices of their lives this spring, as inflation continues to rear its ugly head in transportation costs.”
“Many motorists in the United States will be paying the highest prices of their lives this spring, as inflation continues to rear its ugly head in transportation costs,” says the Associated Press. — Tom Kloza, Director of the OPIS
One of these is that the crude-oil market has lost some players as a result of the pandemic, particularly companies that used to act as “circuit breakers” for the market, and as a result, several exploration and production companies have announced that they will not hedge in futures contracts.
“A smaller number of participants translates into greater volatility” in the oil markets, according to Kloza.
Refinery capacity in the United States has also decreased, he said, from a peak of just shy of 19 million barrels per day in 2019 and 2020 to 18.1 million barrels per day today.
The demand for gasoline, on the other hand, is “lumpier than ever,” and there will be some weeks from May through September when consumption will exceed 9.5 million barrels per day, according to Kloza. “The gasoline distribution system in the United States was not designed for peak summer demand.”
According to the Energy Information Administration, average gasoline consumption will reach 9.1 million barrels per day in 2022.
According to Kloza, the reason why gasoline prices have remained high is that there is a “belief that supplies will be tight as the ‘perishable’ gasoline is purged to make way” for the spring and summer’s more difficult-to-make grades of gasoline that are more environmentally friendly.
According to him, virtually all of the approximately 250 million barrels of gasoline inventory in the United States is of the winter grade. “Consider it in terms of bananas. When they are harvested in the second quarter, they will be brown and unfit for distribution.”
According to Kloza, gasoline inventories for February are “meaningless.” The key is how much summer-grade gasoline we have in April when it comes to gasoline.