Sept. 24–Motorists waiting for post-Labor Day gas prices to drop could be waiting awhile, according to some analysts who don’t foresee the cost of a fill-up decreasing any time soon among strong demand and short supply.
Gas prices in the region averaged $2.86 today, up from about $2.74 a week ago and 73 cents higher than a year ago at this time, according to the website GasBuddy.com, which tracks U.S. gas prices.
“Oil prices have rallied more than what we would have expected in fall,” said Patrick DeHaan, a petroleum analyst for GasBuddy. The gas prices are higher than they’ve been since September 2014, when they topped $3.36.
But hurricane Florence isn’t the culprit, said Kara Hitchens, a Dayton area AAA spokeswoman. There aren’t oil refineries in the Carolinas, so natural disasters don’t impact the gas prices like a hurricane that hits the Gulf, she said.
Some of the price jump can be attributed to the regular cycles states in the Midwest follow, where prices peak before dropping daily, just to hit another peak, according to the Federal Trade Commission’sBureau of Economics.
Several factors in the oil industry are disrupting the normal cycle of fuel costs as demand remains stronger than average moving into the fall season. More people are still traveling among warmer weather and Americans have started purchasing large, less fuel efficient vehicles as gasoline returned to affordability over the last few years.
Within the last four weeks, Americans consumed about 9.7 million barrels each day, up 2 percent from last year. Adding in total oil products, which includes diesel, jet fuel and oil used to make plastic bags, the nation used about 21.4 million barrels per day, up 5 percent from last year, according to the Energy Information Administration.
The United States only produces about half of what it needs, DeHaan said. The rest it imports from other nations. While the U.S. doesn’t import from Iran, countries who do business with the Middle Eastern nation don’t want to “cross the U.S. president” as he imposes full sanctions effective Nov. 4, so they are starting to buy oil from other countries.
The sanctions are expected to take between 1 million and 1.5 million barrels of crude oil off the market each day, he said.
“Demand is going down a little bit, but certainly not by millions of barrels a day,” DeHaan said.
Those sanctions are already costing consumers about 5 cents to 10 cents more per gallon when filling up. The Organization of the Petroleum Exporting Countries said over the weekend it will only increase production if consumers demand it in response to a tweet from President Donald Trump criticizing the organization and demanding it do something to reduce the prices.
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OPEC’s response concerns DeHaan, he said, because if supply continues to be low while demand is up, prices are going to continue to rise, or at least stay elevated.
“It’s going to be interesting. (Trump) may now be forced to look back into doing a deal with Iran because if he doesn’t want oil prices to go up anymore, that’s really the only way,” he said.
Refineries are also putting out a slightly smaller supply as half a dozen in the region undergo maintenance, Hitchens said.
Fall is a common time for refineries to do maintenance since there’s usually a lower demand for gasoline, but there’s more maintenance going on this year than most, DeHaan said.
Maintenance isn’t a huge concern, DeHaan said, but paired with high demand and sanctions, the maintenance will help keep costs elevated.
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