As we get closer and closer to driving season, gas prices are poised to continue their increase at the pump, which could put a strain on families traveling for the warmer months. According to AAA, the nation’s average regular gas price has increased for the second straight week, rising by around 0.10/gallon from the week prior, to $3.60. This is up 0.13/gallon from a month ago but down from this time last year, when average regular gas prices topped $4/gallon.
There are a few factors contributing to the upward pressure on gas prices today and some that are pointing towards this trajectory continuing. OPEC made an announcement, just over a week ago, that they were cutting production by over a million barrels a day. This surprise bullish statement sent shockwaves throughout the energy industry. Many states are also in the middle of transitioning from a cheaper, higher-RVP winter gas to a more expensive, lower-RVP summer gas, as mandated by the EPA. To successfully accomplish this switch, terminals and tank farms are having to drain their gas inventories down completely to keep the new, summer batches on-spec.
An even more alarming sign is the inventory report that is released weekly by the EIA. Last week’s report showed that nationwide gas supplies are ~6% lower than this time last year and ~7% lower than historical. Gas demand remains strong, up ~6% from last year and up ~4% from historical. Lower inventory, coupled with increased demand, is a recipe for higher gas prices going into Memorial Day and through the summer. If demand continues to outpace supply, we can be right back to where we were last year, north of $4/gallon for regular gas.
Guttman Energy is here to provide you with the fuel you need, coupled with programs that can keep your gas prices competitive throughout the year. Please reach out to your sales representative to find out what we can offer to improve your company’s profits.