Following weeks of steady pump price declines, gas prices are starting to increase across the country. On the week, a gallon of regular unleaded is, on average, a nickel more expensive with nearly 25 states seeing an increase of a nickel or more since last Monday.
“For the more than 41 million motorists hitting the road this week to celebrate the Independence Day holiday, they will find gas prices cheaper than Memorial Day weekend, but more expensive than they’ve been paying the last few weeks,” said Jeanette Casselano, AAA spokesperson. “It’s typical to see increases at the pump ahead of the holiday, but we may see prices continue to jump throughout the month due to refinery interruptions on the East Coast, increasing demand and fluctuations in crude oil price.”
Factors driving up gas prices:
Crude oil prices: West Texas Intermediate (WTI) was priced as low as $51.13 in mid-June, but has since jumped more than $8 to land as high as $59.43. Crude accounts for as much as 60% of the retail gasoline price.
Supply: The Energy Information Administration (EIA) reports total U.S. stocks at 232 million bbl for the week ending June 21, which is the lowest June stock level seen since 2015.
Demand: Demand remains robust for peak summer driving season at a four-week average of 9.6 million b/d. EIA reports gasoline stocks drew down for a second week in its latest report. This trend isn’t likely to stop this week, especially with 41.4 million Americans expected to hit the road for the Independence Day holiday.
Philadelphia Energy Solutions (PES): Last week, PES announced that they will permanently close the South Philadelphia refinery this month, which is the oldest and largest refinery on the East Coast. The announcement came following a June fire and explosion at the refinery, which produces 335,000 barrels of crude per day (42 U.S. gallons per barrel). While gasoline stocks from Canada, neighboring refineries, and the Colonial Pipeline will help backfill supply, retailers will likely face increased transportation costs which will drive up prices in the Northeast and surrounding regions.
Organization of the Petroleum Exporting Countries (OPEC): OPEC and its partners will meet today and tomorrow in Vienna and are likely to extend the current production reduction agreement of 1.2 million b/d through the end of the year, which could push crude oil prices more expensive.
Today’s national average is $2.71, which is a nickel more than last week, but 11 cents less than last month and 14 cents cheaper than a year ago.
The nation’s top 10 largest weekly increases are: North Carolina (+13 cents), South Carolina (+13 cents), Indiana (+11 cents), Delaware (+11 cents), Florida (+11 cents), Georgia (+10 cents), Ohio (+9 cents), Maryland (+9 cents), Mississippi (+8 cents) and Michigan (+8 cents).
The nation’s top 10 least expensive markets are: Mississippi ($2.32), Alabama ($2.33), Louisiana ($2.34), Arkansas ($2.35), South Carolina ($2.37), Tennessee ($2.41), Missouri ($2.41), Texas ($2.42), Oklahoma ($2.42) and Virginia ($2.45).
Mid-Atlantic and Northeast
Following the fire and subsequent announcement that the PES South Philadelphia refinery will close this month, Pennsylvania’s gas prices jumped seven cents on the week, but it was not the largest increase in the region. Gas price averages in North Carolina (+13 cents), Delaware (+11 cents) and Maryland (+9 cents) saw the largest weekly increases in the region and are among the top 10 increases in the country. While all states in the region saw prices increase, these four states saw prices increase a nickel or more in addition to the four previously mentioned: Tennessee (+6 cents), New Jersey (+6 cents), Maine (+6 cents) and New Hampshire (+5 cents). Gas prices are likely to continue to increase with the closure of PES.
Gas prices in the Mid-Atlantic and Northeast range from $2.91 in Pennsylvania to $2.41 in Tennessee. Given current conditions, it would not be surprising to see Pennsylvania’s average flirt with the $3/gallon mark in coming weeks.
With regional refinery dropping to 84%, due to the fire at PES, it’s no surprise that regional gasoline stocks drew by 1.2 million in EIA’s data for the week ending June 21. Total stocks sit at 60.8 million bbl – the lowest June inventory recorded for the region since 2015. This is likely to tighten further and drive gas prices moderately more expensive for the bulk of the region this month.
Great Lakes and Central States
Gas prices are more expensive for every state in the Great Lakes and Central states with the exception of the Dakotas (-1 cent). Indiana (+11 cents), Ohio (+9 cents) and Michigan (+8 cents) saw among the top 10 largest increases in the country on the week. With close proximity to Pennsylvania, these three states’ increases are likely due to the upcoming closure of the PES facility.
In addition, Ohio could see further increases this week due to the gas tax increase of 10.5 percent per gallon going into effect today, Monday, July 1; though it is likely that gas stations had already started to increase retail gas prices, due to the new tax.
Regional gasoline stocks have consistently built since mid-May, according to EIA data. The latest add of 340,000 bbl pushes total stocks to 49.2 million bbl while regional refinery utilization fell slightly (2%) to 93%.Though gasoline stocks sit at a robust measurement, motorists are likely to see gas prices increase – though moderate for most of the region – in the coming weeks, in part due to the PES closure and increasing crude oil prices.
Skewing from the rest of the country, gas price averages in the Rockies decreased on the week: Utah (-6 cent), Idaho (-5 cents), Colorado (-2 cents), Wyoming (-2 cents) and Montana (-1 cent).
With the latest declines, the region’s averages are all $3/gallon or less with Idaho at the $3 mark and Utah at $2.98. Motorists in these two states and Colorado are saving double-digits a gallon to fill-up compared to last month: Idaho (-19 cents), Utah (-18 cents) and Colorado (-16 cents).
With regional refinery remaining strong at 99% and robust gasoline stocks sitting at 7.5 million bbl, per EIA data, gas prices are not likely to increase in the near future. One outlier that could drive up prices, though moderately, would be crude oil prices, which make up nearly 60 percent of the retail price.
South and Southeast
The majority of South and Southeast states – eight – saw gas prices increase seven cents or more in the last week. South Carolina (+13 cents) saw the largest increase in the region and tied with North Carolina for the largest weekly increase in the country. Only Arkansas (+4 cents) and New Mexico (+3 cents) saw modest weekly increases. The region continues to remain home to the cheapest state averages in the country: Mississippi ($2.32), Alabama ($2.33), Louisiana ($2.34), Arkansas ($2.35) and South Carolina ($2.37).
Gasoline inventories built by 215,000 bbl, to total regional levels at 83.6 million bbl Though regional refinery utilization jumped to 96% for the week ending June 21, stocks are poised to potentially draw in the weeks ahead as the region is likely to be tapped to help provide supply to the Mid-Atlantic and Northeast to replace supply shortfall from the PES refinery. Motorists in the South and Southeast could, in turn, potentially see prices increase more this month.
Motorists in the West Coast region are paying the highest pump prices in the nation, with all seven states landing on the top 10 most expensive list today. California ($3.75) and Hawaii ($3.63) are the most expensive markets. Washington ($3.35), Nevada ($3.31), Alaska ($3.25), Oregon ($3.22) and Arizona ($2.88) follow. Of note, most state averages in the region have decreased on the week, with Alaska (-5 cents) seeing the largest decline. California’s average held steady, but more increases could be on the way since the state’s new gas tax of 5.6 cents goes into effect today.
The EIA’s recent report for the week ending on June 21 showed that West Coast gasoline stocks decreased slightly by 200,000 bbl from the previous week and sit at 30.8 million bbl. The current level is similar to levels at this time last year, which could help prices stabilize if there is any disruption in supply or gas demand surges in the region this week.
Oil market dynamics
At the close of Friday’s formal trading session on the NYMEX, WTI dropped by 96 cents to settle at $58.47. Crude prices moved mostly higher last week following surprising new data from EIA that showed total domestic crude inventories took a surprisingly large draw of 12.8 million bbl last week. At 469.6 million bbl, crude inventories are almost 53 million bbl higher this year over last, but the dramatic decline has the market concerned that the global crude market is tightening.
Adding to those concerns, OPEC will likely announce this week that it and its partners, including Russia, will extend their 1.2 million b/d crude production reduction agreement for an additional six to nine months. Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend existing output cuts until December 2019 or March 2020. Saudi Energy Minister Khalid al-Falih said the deal would most likely be extended by nine months and no deeper reductions were needed. As crude prices climb due to the production cuts, American motorists should expect higher pump prices in the weeks ahead.
Motorists 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.