US Gas Prices Rise Due to Refinery Shutdowns and Higher Oil Costs

Gas prices in the United States have witnessed significant surges due to recent restrictions on refineries and increasing oil prices. As of Monday, the national average price per gallon was $3.35, marking a $0.09 increase from the previous week, although it’s still $0.05 lower than the same period a year ago, according to AAA data.

Severe weather and power shutdowns at crucial production plants have compounded the constraints on US refining. Tom Kloza, OPIS’s global head of energy analysis, predicts that these issues may push US gas prices beyond the figures seen a year ago in the coming days.

In December, average gas prices in 24 states, spanning the Midwest and Gulf Coast, were below $3 per gallon. By Monday, only nine states had managed to keep their prices under that mark. The BP refinery in Indiana, which has the capacity to process 435,000 barrels of crude oil per day, had to cease operations due to a plant-wide power outage in February. However, it is projected to resume full production this month.

Gas prices in Indiana and Illinois averaged at $3.73 and $3.42 per gallon, respectively, on Monday. Yet, increasing gas prices are not confined to the Midwest. Western states have begun experiencing substantial increases, with gas prices rising around $0.25 per gallon, despite decreased demand due to harsh weather conditions.

In California, gas prices peaked at an average of $4.83 per gallon on Monday, climbing from $4.64 just a week prior. Patrick De Haan, GasBuddy’s head of petroleum analysis, notes that seasonal volatility typically leads to more drastic price fluctuations during this time of year. Factors contributing to rising prices include refinery maintenance, the impending arrival of more expensive summer gasoline, and increasing demand. These aspects may contribute to an additional $0.20 to $0.50 hike per gallon before Memorial Day.

By Friday, US crude futures had risen above $80 per barrel, a threshold not breached since November. West Texas Intermediate (WTI) saw a slight decline to under $79 on Monday, while Brent also slipped below $83 per barrel. Crude futures have been on a steady rise for two consecutive months, despite the OPEC+ deciding to prolong their 2.2 million barrels per day output cut into the next quarter. The likelihood of the cartel maintaining the output reductions had previously contributed to an escalation in contract prices.

According to Andy Lipow from Lipow Oil Associates, the ongoing rally in crude oil prices can be attributed to the anticipation that OPEC+ will sustain their voluntary production cuts deep into the second quarter of 2024. As gas prices continue to fluctuate, analysts predict the cost fluctuations will have national and international effects.