Retail gasoline prices have surged to their highest levels since late April, driven by refinery outages and the strength in crude oil prices. As a result, drivers may soon face the highest costs at the pump since last summer.
According to data from GasBuddy, the average price for regular unleaded gas is currently $3.604 per gallon, marking the highest daily average in months. This represents an increase of 6 cents per gallon compared to a month ago, but it still remains nearly 72 cents per gallon below last year’s levels.
Refinery issues have plagued key locations such as Port Arthur in Texas, Baton Rouge in Louisiana, and Bayway in New Jersey. At Phillips 66’s Bayway refinery, a catalytic cracking unit with a capacity of 150,000 barrels per day was offline for most of June and July due to unscheduled repairs. Exxon Mobil Corp. is also conducting maintenance on a unit at its Baton Rouge refinery, which may lead to several weeks of downtime for a gasoline-making catalytic cracker.
Texas has been hit by heat-related outages at several refineries, which are expected to continue due to the persistence of the “heat dome” phenomenon. This prolonged excessive heat limits gasoline supply just as inventories reach their lowest levels for July since 2015.
Patrick De Haan, head of petroleum analysis at GasBuddy, emphasized the impact of extreme heat on refinery operations. High temperatures can cause both equipment malfunctions and power outages, disturbing the refining process and forcing facilities to shut down for days.
Given these circumstances, the supply of gasoline is under pressure. Refineries are susceptible to extreme temperatures that can significantly disrupt their sensitive equipment.
In conclusion, consumers should brace themselves for further increases in gasoline prices as refinery outages persist and crude oil prices remain strong.
Gasoline Prices Surge Following Refinery Outages
Gasoline prices in the United States have started to rise dramatically due to recent refinery outages, resulting in the largest daily jump since March. According to industry experts, this surge is expected to be reflected in pump prices across many states.
The Energy Information Administration has reported a 4.4% decrease in total motor gasoline supplies, with current levels at 218.4 million barrels, compared to a year ago.
The ongoing issues with refineries have provided significant support to gasoline prices, which may continue to increase if inventory levels decline rapidly.
Despite the refinery outages, drivers have not yet experienced major price increases at the pump. This can be attributed to the fact that while gas demand this summer is higher than in 2022, it still lags behind the demand seen in 2018 and 2019.
The futures prices for reformulated gasoline settled at $2.8951 per gallon on Monday, the highest finish since October. This rise in gasoline futures aligns with the surge in oil prices, which have also experienced significant growth. As of Monday, front-month U.S. benchmark West Texas Intermediate crude futures have increased by more than 11%.
On Tuesday, September WTI oil traded at $79.71 per barrel on the New York Mercantile Exchange.
Based on Monday’s futures price settlements, the 3-2-1 crack spread, representing the theoretical refining margin, stood at $41.11 per barrel. Although this is considered a strong level, it was even stronger earlier this year, particularly during the first quarter when refinery margins were exceptional.
Experts predict that gasoline prices at the pump may soon reach their highest point of the year, potentially reaching $3.66 per gallon. However, depending on various factors, prices could even surpass $3.75.
Industry analysts express concern over the impact that a hurricane could have on refinery operations, which could further exacerbate gasoline supply issues. In such a scenario, there is a strong possibility of gasoline prices reaching or surpassing an average of $4 per gallon nationally. The last time prices were at or above $4 on average was in August of the previous year.