Pain at the Pump Fueled by a Combination of Factors
HAMILTON, NJ - After a relatively quiet start, January gas prices rose double-digits in the last week. The national average price of gasoline increased 13 cents (4 percent) a gallon in January, which was the first monthly increase since August. Gas prices nationally increased 14 days in a row for a total of 22 days during the month. Gas prices increased at a slower pace than in January 2012, when the national average increased 17 cents (5 percent) a gallon. The national average price for a gallon of regular unleaded gasoline jumped 13 cents over last week to $3.46 Friday, 17 cents more than last month and even with the year ago price.
Pain at the pump is being fueled by a combination of factors: rising crude oil prices, rising wholesale prices, refinery maintenance slowdowns and low gasoline supplies. These factors typically combine to push gas prices higher every spring, after what is usually an uneventful winter in terms of gas prices. However, a rigorous schedule of January maintenance at West Coast refineries and low inventories on the East Coast have contributed to the sharp rise in prices at the pump.
Crude oil has risen 14 percent since mid-December, advancing just shy of the $98 per barrel mark by Thursday and reaching a four-month high. Several factors have supported crude oil prices in recent weeks including, optimism of stronger economic growth in the U.S. (when the economy strengthens, demand for fuel increases) and a weakened U.S. dollar due to continued geopolitical tensions in the Middle East (Algeria and Egypt). Crude oil closed at $97.64 Friday.
In its weekly report, the U.S. Energy Information Administration (EIA) data showed crude oil stocks rose by 5.9 million barrels to 369 million barrels. Gasoline stocks fell by 956,000 barrels to 232.3 million barrels. Implied gasoline demand continued to climb, rising 70,000 barrels per day (bpd) to 8.501 million bpd. This is up from 8 million bpd three weeks ago.
“Pain at the pump has returned after a relatively quiet start to the year, with double-digit increases in gas prices in the past week, causing motorists and analysts alike to take notice,” said Tracy Noble, spokesperson for AAA Mid-Atlantic. “Various factors have contributed to this unseasonal rise in gas prices, perhaps the most obvious being the recent rally in crude oil prices. If crude oil continues to rise, gas prices will likely follow suit. The double-digit weekly spike, combined with various national and international factors, leads AAA analysts to believe the national gas price average could rise to $3.50 per gallon in February.”
The Week Ahead
AAA expects the national average to increase in February due to seasonal refinery actions, but at a slower pace than in the previous two years when the average climbed by 29 cents per gallon (2012) and 27 cents per gallon (2011). Despite the expected slower overall pace, it is likely the national average will rise temporarily above year-ago levels in the coming days. Gas prices in February increased at a quick pace over the past couple of years due to higher oil costs caused primarily by civil war in Libya (2011) and geopolitical tensions with Iran (2012). While gas prices this February are expected to increase at a slower rate, major events such as an unexpected refinery outage, increased unrest in North Africa or changes in the global economy could affect this month’s forecast. The national average in February has increased nine out of the previous ten years. Last year gasoline prices jumped 28 cents, or 8 percent, in February and averaged $3.55 for the month.