free webpage hit counter

Gasoline prices have fallen, but probably haven’t peaked yet

Drivers have paid record prices for gasoline this year, but fuel costs have not peaked, given strong demand and the potential to disrupt Gulf Coast refineries during the current hurricane season.

The national average price of regular unleaded gasoline hit $5.034 a gallon on June 16, the highest on record, according to GasBuddy. Prices edged back slightly, posting a weekly decline in the period ending June 20 for the first time in nine weeks. On June 29, it was $4.87.

The drop in gasoline prices left U.S. benchmark crude oil prices below $102 a barrel, down from this month’s peak of $123.

Overall concerns about the economy and the Federal Reserve raising interest rates have put pressure on oil, said Patrick de Haan, head of petroleum analysis at GasBuddy. Gas prices are significantly lower than they were a couple of weeks ago, and they’re likely to look more relieved for a while.

Still, gasoline prices tend to peak at the start of the summer driving season, which may not happen this year, DeHaan said.

Memorial Day on May 30 this year, which traditionally marks the start of the summer driving season, usually coincides with a June 1 deadline for retailers to switch to selling more eco-friendly summer-fuel ranges.

However, Russia’s situation with Ukraine and Covid “has pushed peak price expectations to July to match actual demand,” de Haan said. There is absolutely no “breathing room” in the oil market.

The biggest surprise, he said, was “how well consumers have recovered in the face of record prices.”

Gas demand averaged 8.9 million barrels per day in the four weeks ended June 24, with prices hitting record highs, according to the Energy Information Administration. That’s “a testament to Americans’ willingness to get out as the economy reopens,” says de Haan.

This year, a record 42 million people are expected to hit the road during the holiday weekend from June 30 to July 4, according to AAA’s Independence Day travel forecast.

Given the strong demand, the timing of Atlantic hurricanes and their potential to disrupt refinery activity, as well as oil production and transportation in the Gulf of Mexico, is of even greater concern. The Atlantic hurricane season officially runs from June 1 to November 30, and more than 47% of US petroleum refining activity is located along the Gulf Coast.

If the region gets a hurricane like 2017’s Harvey or 2021’s Ida, “the impact could be pretty profound, especially if we exacerbate the problems by cutting federal taxes, which will prompt more Americans to hit the road,” DeHaan said.

President Biden has proposed suspending federal gas taxes to lower prices at the pump, though analysts don’t expect much of a drop for drivers. The federal tax on gasoline is 18.4 cents a gallon.

But according to the EIA, only 5% of gas costs in May were due to “distribution and marketing,” which includes the retail markup on fuel, pointed out Jeff Leonard, the national association’s vice president of strategic industry initiatives. Convenience stores, or NACS.

“The best solutions to solve the problem should focus on the 95% cost of making the wholesale price,” he said. That mostly includes refining and crude oil costs.

We’ve seen “high tolerance” for higher fuel prices, so the demand curve won’t start to fall until “we see some apocalypse”. [price] Numbers like $6,” De Haan said.

Leave a Reply

Your email address will not be published.

Previous post Gas prices are down just in time for Fourth of July travel — here’s why
Next post Famous Hong Kong artist infected after four doses of Sinovac vaccine