Gasoline prices have risen in recent weeks, buoyed by demand, but oil supplies haven’t kept pace, with recent price spikes attributable to the rare cold snap in Texas.
National average gas prices have increased for eight weeks in a row, reaching $2.72 as of Monday, according to price tracker GasBuddy. The Energy Information Administration finds average gas prices are roughly 30 cents higher than they were this time last year.
AAA predicts the national average price could continue to climb higher this month, reaching at least $2.80.
HERE'S WHY GAS AND COAL WENT OFFLINE DURING THE TEXAS COLD WEATHER CATASTROPHE
Price spikes of 17 cents in just the last two weeks are largely a result of the cold snap in Texas in late February that led to widespread power outages in the state. The frigid weather also dampened oil and gas production in the region and shut down a significant portion of Gulf Coast refining capacity, putting pressure on supply.
The Energy Department estimates that 20% of U.S. total refining capacity was shut down due to the cold weather, with much of that occurring in Texas. Gross oil inputs to Gulf Coast refineries during the week of the winter storm decreased 28%, the largest weekly decline since Hurricane Harvey in 2017, the EIA said in a research note Monday.
Market analysts expect the effect of the cold weather on gas prices is largely over by this point.
Nonetheless, they say gas prices will continue to increase as demand growth outpaces supply. Patrick De Haan, head of petroleum analysis for GasBuddy, noted gasoline demand last week reached its highest level since the beginning of the pandemic, while the amount of active U.S. oil rigs is down nearly 50% compared to last year.
“To put it simply, demand is recovering much, much faster than oil production levels, which is why oil prices have soared,” De Haan said. Crude oil prices make up a little more than half of what consumers pay for in a gallon of gasoline, per the EIA.
De Haan pointed to a meeting later in the week of the Organization of the Petroleum Exporting Countries, where governments will consider raising caps on oil production. It isn’t clear, though, whether OPEC will raise production enough to meet growing fuel demand, driven by the United States, he added.
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As refineries return to normal operating levels, that should temper increases in gas prices, AAA said.
“While the month is roaring in like a lion, by the end of it, we could see some relief at the pump as refineries resume normal operations, especially if crude oil prices show signs of stability,” said Jeanette Casselano McGee, a spokeswoman for AAA.
