Gas Prices on rise – As summer driving season approaches
Although the recent weather outside may suggest otherwise, the summer driving season is fast approaching. Defined by the Energy Information Administration (EIA) as April through September, the summer driving season historically leads to higher fuel demands and prices; and this year may be the most expense since 2014.
The EIA estimates that consumers would likely see an increase as high as 14% over last summer – an average of $2.74/gallon, while they also expect highway travel to increase 1.3% over the same period. Let’s take a brief look at some of the reasons:
- Hurricane Harvey – According to AAA Mid-Atlantic, the hurricane that hit the Gulf Coast last August is a key driver. Because of the hurricane, many refineries that supply specifically the Northeast have postponed their regular fall maintenance periods to the spring, which in turn will limit spring production. Anytime there is an effect on refining and production, you will typically see an increase in price.
- OPEC-Russia Supply Cuts – Foreign Oil supply is down, largely due to OPEC’s efforts to boost prices by curbing production. OPEC and Russia reached an agreement in late 2016 to pump less oil and agreed last November to extend those cuts through the end of 2018. The production cuts are designed to reduce the global oil glut – and they appear to be working, judging from the recovery in prices and decline in stockpiles.
- Summer Blend Gasoline – Every year in the spring, refineries switch from winter-blend gasolines with higher Reid Vapor Pressure (RVP) to a summer-blend with lower RVPs. This changeover requires significant work and is more expensive to produce. The cost is passed on to the consumer at the pump.
As of April 16th the national average gasoline price is $2.747, up $.0.230 from the first of the year and $0.311 from just a year ago.
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