Los Angeles County’s average gas price rose to $5.545 a gallon of self-serve regular on Wednesday, up 8.5 cents from the previous day, AAA data showed, as refinery problems compounded an increase that began nearly three weeks ago.
Nationwide, a 99-day run of falling gasoline prices — which gave consumers a glimmer of hope that red-hot inflation might cool — has ended, with pump prices still higher than a year ago.
The nationwide average price for a gallon rose less than a penny Wednesday to $3.68 a gallon, according to AAA. That’s down from a record $5.02 average in mid-June. The LA record was $6.462 in mid-June.
The question now is whether the increase in pump prices is just a blip or a precursor to the return of sustained higher prices. The answer is important to motorists and to President Joe Biden, who has taken credit for lowering prices by releasing millions of barrels of oil from the nation’s reserves.
Gasoline prices largely reflect trends in global oil prices, and crude — both the US benchmark and international Brent — has fallen since mid-June on fears of a global recession that will reduce energy demand.
Unforeseen events can affect gasoline prices. Some Southern California refineries have reported outages, which could hamper supplies because some refineries outside of California use special fuel blends mandated by the state’s clean air rules.
A BP refinery in Toledo, Ohio, was shut down Wednesday after an explosion and fire killed two workers. There are several weeks left in the peak hurricane season in the Gulf of Mexico. The National Oceanic and Atmospheric Administration says there is a 65% chance of increased hurricane activity this year.
Many energy analysts believe that prices are more likely to rise than fall in the next few months. However, changes in sentiment about the economy, Russia’s war against Ukraine, and hurricane season — which always threatens to disrupt refineries along the Gulf Coast — make forecasts uncertain.
“I suspect we’ll see some low days and some high days through the end of the year with volatile prices for gasoline,” said Tom Kloza of the Oil Price Information Service. He predicted a run of price hikes early next year due to investors, speculators and “fear that there won’t be enough fuel to go around”.
Phil Flynn, an analyst at Price Futures Group, said prices will rise after withdrawals from the US Strategic Petroleum Reserve – a million barrels a day for six months – end this fall.
“The market is going to start pricing in, and refiners are not getting this cheap oil from the reserves,” Flynn said. “We will see significant oil price increases in the winter.”
Some businesses, such as airlines, are able to pass on higher fuel prices to their customers. Others could not do it.
“We transport for farmers and we cannot collect [prices] They’re also struggling for farmers,” said Mike Mitchell, part owner of Mitchell Milk Hauling, which hauls about 10 million pounds of milk a year from farms in northwestern Pennsylvania.
The company’s seven trucks burn through about $20,000 a month in gasoline, and the drop in gas prices this summer offered only limited relief.
“Everything you buy goes up,” Mitchell said. “Every part of the truck doubled, just about.”
Al DiGennaro, an attorney with Pennsylvania waste hauler JP Mascaro & Sons, said high gas prices have taken a toll and their unpredictability is difficult to cope with.
“It creates uncertainty about how you’re bidding in the future … a lot of government contracts last three to five years,” said DiGennaro, whose company owns about 300 trucks.
Average prices rose more than $5 a gallon nationwide and more than $6 a gallon in California in June as economic recovery and increased travel boosted demand for gasoline and Russia’s war in Ukraine led to a spike in oil prices.
Rising prices have caused financial pain for families and political headaches for the Biden administration. With midterm elections for Congress less than two months away, it’s hard to know whether voters will reward Biden and Democrats for the recent drop in prices — down $1.34 a gallon from a record set on June 14 — or blame them because prices are still there. That’s above the $3.19 average a year ago.
In addition to releasing strategic reserve oil, Biden pressed other oil-producing countries to increase production and clashed with oil company executives who accused them of making undue profits while Americans struggled with high pump prices.
“He’s taking a victory lap every time prices go down, even though prices went up significantly when he took office,” the analyst said of Flynn administration officials.
US and international oil prices rose above $120 a barrel in June but have since fallen. On Wednesday, West Texas Intermediate crude was trading at around $83, while Brent crude, the international benchmark, was around $90.