Even before Wednesday’s action by OPEC+ to cut oil production, gas prices in the United States were on the rise. More price increases at the pump are likely to come.
Gas prices rose nearly 3 cents a gallon in the AAA’s daily reading on Wednesday, to $3.83 a gallon, the biggest one-day rise in nearly four months.
The 99-day streak of price declines from mid-June to September 20 may become a distant memory, although today’s prices are still well below June’s all-time high of just over 5.03 $ per gallon. Gasoline prices have risen every day but one day since then and are now up 16 cents per gallon, or 4%, since hitting a low two weeks ago at $3.67 per gallon. gallon.
For the most part, the price increases have been slow and gradual, but that could be about to change. OPEC+, which includes not only the oil cartel nations but also other major oil producers like Russia, agreed on Wednesday to cut oil production by about 2 million barrels a day.
Oil futures were up around 2% on the news and gasoline futures were also slightly higher following the OPEC decision. Gasoline futures have risen about 20 cents per gallon since the end of the decline in gasoline prices last month, pointing to a possible rise in prices ahead.
Oil and gasoline futures had been falling since mid-June on growing worries about a possible recession reducing demand for gasoline and oil, among other factors.
The recent increases were caused by the unusually high number of U.S. refineries closed for maintenance, said Tom Kloza, global head of energy analysis for OPIS, which tracks gasoline prices for AAA. He said nearly 18% of the country’s refining capacity is now offline.
“A lot of it got pushed back to the spring because they were making so much money,” he said. “The margin of error in U.S. refining capacity is so slim right now that you can’t lose capacity without affecting prices.”
This is normally the time of year when gas prices drop, as regulations requiring cleaner but more expensive gas to fight smog come to an end in most of the country. The end of the summer driving season also reduces demand, pushing prices down.
Unfortunately, the compression of refining capacities “means gas prices aren’t going to come down like I thought they would,” said veteran oil analyst Andy Lipow. “In fact, they could drift upwards.
Another factor that has helped to reduce prices in recent months: the release of around 1 million barrels of oil per day from the country’s strategic petroleum reserve, which is due to end on November 1.
“No one really knows what happens when SPR sales end,” Kloza said.
One thing that could lower prices: California, which typically keeps its rules requiring summer blending of gasoline in place through November, lifted the requirement early last week. This could lower the national average price, although it only affects gasoline in California. The state accounts for about 9% of gasoline consumption in the United States, so the change may affect the national average even if prices don’t move elsewhere. The average price there is $5.52 per gallon, by far the highest in the country.
“I don’t think we’ll see any major changes in domestic pricing. even though we see California prices coming back into the pack,” Kloza said.
Lower gasoline prices have been an important check on overall price increases, as well as supporting consumer spending, as it means more money is going into consumers’ pockets.
The typical American household buys about 90 gallons of gasoline per month, so the drop from $5.03 a gallon to a low of $3.67 a gallon at the end of last month represented a savings of about $120 per month. By contrast, the 16-cent rise from that low point cost about $14 per household.
The Biden administration’s concern is that rising gas prices will rekindle voters’ attention.
For this reason, members of the Biden administration have been doing all they can to convince OPEC countries not to cut production and possibly raise prices ahead of a midterm vote. These efforts were in vain.
– CNN’s Alex Marquardt, Natasha Bertrand and Phil Mattingly contributed to this report