{"id":10228,"date":"2023-05-18T01:04:18","date_gmt":"2023-05-18T05:04:18","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/heres-what-might-lead-to-a-spike-in-gasoline-prices-this-summer\/"},"modified":"2023-05-18T01:04:19","modified_gmt":"2023-05-18T05:04:19","slug":"heres-what-might-lead-to-a-spike-in-gasoline-prices-this-summer","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=10228","title":{"rendered":"Here\u2019s what might lead to a spike in gasoline prices this summer"},"content":{"rendered":"
\n

Retail gasoline prices may have already seen their peak for the year, but the potential for a \u201chigher high\u201d at the pump remains as drivers head into the U.S. summer driving season.<\/p>\n

U.S. gasoline prices hit a peak of $3.6855 a gallon on April 20, and that looks to be the top of the market for the first half of the year, said Tom Kloza, global head of energy analysis at the Oil Price Information Service (OPIS), a Dow Jones company. \u201cPrices have come down at a glacial pace since that date, but there is a strong history of peak prices arriving well before many Americans take to the road.\u201d<\/p>\n

\n

The Memorial Day holiday on May 29 traditionally marks the start of the summer driving season, though the U.S. Energy Information Administration defines the driving season as April 1 through the end of September.<\/p>\n

This year presents plenty of upside price risk during the peak driving weeks, which encompass the period when schools close and extends into early August when school tends to resume for southern and Midwestern regions, said Kloza. Risks of higher gasoline prices are \u201cquite considerable for the remainder of August and September thanks primarily to the risks commensurate with peak [Atlantic] hurricane season.\u201d<\/p>\n

On Tuesday, the national average for regular unleaded gasoline prices stood at $3.531 a gallon, according to AAA. That\u2019s down from $3.669 a month ago and $4.483 a year ago. Those prices are a far cry from last year\u2019s record high of $5.016 on June 14. <\/p>\n

Read:<\/strong> Gasoline prices may have already reached a summer-season peak<\/p>\n

Kloza said that the base case for OPIS points to the April 20 gasoline price as the most likely high for 2023, but he offered several reasons why the potential for higher prices \u201cshouldn\u2019t be ignored.\u201d<\/p>\n

Among those factors, hurricane impacts are \u201cby far the most serious threat,\u201d he said.<\/p>\n

In the last five years, some refineries have closed in California, New Mexico, Pennsylvania and other locations, said Kloza. Additions to U.S. refining, meanwhile, have been seen almost exclusively on the \u201cTexas and Louisiana coastal real estate,\u201d with those two states seeing a refining capacity increase of more than 400,000 barrels a day so far this year.<\/p>\n

That\u2019s \u201cgood news \u2014 unless it gets threatened or knocked out by hurricane probability cones,\u201d he said. In 2023, Alabama, Louisiana, Mississippi, and Texas account for about 9.7 million barrels a day of U.S. refining capacity. That\u2019s up from 8.1 million barrels of refining capacity from those four states in 2005, the year of Hurricane Katrina.<\/p>\n

Appreciation in the price of crude oil would be another risk factor for higher fuel prices.<\/p>\n

Prices for U.S. benchmark West Texas Intermediate
\n CL.1,
\n -0.40%<\/bg-quote><\/p>\n

CLM23,
\n -0.40%<\/bg-quote>
\n and global benchmark Brent
\n BRN00,
\n -0.40%<\/bg-quote><\/p>\n

BRNN23,
\n -0.40%<\/bg-quote>
\n crude have been \u201csheared lower thanks to tectonic shifts of macroeconomic plates,\u201d said Kloza.<\/p>\n

The Chinese economic recovery after lifting COVID-19 restrictions has been slow, he said. Still, even some of the most bearish crude-oil analysts believe that the third quarter of 2023 presents the most \u201chospitable environment for crude-oil price appreciation.\u201d<\/p>\n

An $11 a barrel increase in Brent prices from its current level would lift the cost of making gasoline by about 26 cents a gallon, said Kloza.<\/p>\n

The stability of the U.S. electricity grid is another key concern for the gasoline market. Many Gulf Coast and California refineries have cogeneration equipment that would allow them to generate power during brown-outs, or when the local grid is compromised, but most refineries don\u2019t have this capability, said Kloza. \u201cPower outages can disable large refineries over a period of days or weeks\u201d and when a refinery suddenly loses power, procedures dictate several days of start-up activities.\u201d<\/p>\n

Exports of gasoline are also a big concern. The market may be \u201clooking at the most robust foreign demand for gasoline in our lifetime and this could be an ongoing feature,\u201d Kloza said.<\/p>\n

Much of the gasoline produced in Texas, Louisiana and Mississippi moves to Latin America, as refining capacity in South America has dropped, he said, thanks to troubles in Venezuela including poor maintenance.<\/p>\n

Meanwhile, motor gasoline inventories are \u201cquite low,\u201d and that could also send prices for the fuel higher, he said.<\/p>\n

The U.S. currently has just under 220 million barrels of gasoline in storage, said Kloza, citing data from the Energy Information Administration. That compares to 225 million barrels one year ago, and 236 million barrels in 2021. High interest rates tend to dissuade companies from carrying additional inventory, said Kloza. <\/p>\n

He also warned about what he referred to as the \u201cEaster Church Syndrome.\u201d<\/p>\n

<\/p>\n
\n

\n \u201c<\/span> \u201cVery high domestic [gasoline] demand, combined with brisk exports, and a threat to U.S. refining production could, unfortunately, live up to the characterization of a \u2018perfect storm\u2019\u201d for higher prices. \u201d<\/span>\n <\/p>\n


\n \u2014 Tom Kloza, OPIS<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

He explained that the U.S. isn\u2019t built with any safeguards for supply cushions during the \u201cheyday of summer,\u201d and that\u2019s similar to the way churches aren\u2019t built to deal with Easter Sunday crowds.<\/p>\n

\u201cVery high domestic [gasoline] demand, combined with brisk exports, and a threat to U.S. refining production could, unfortunately, live up to the characterization of a \u2018perfect storm\u2019\u201d for higher prices, he said.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Retail gasoline prices may have already seen their peak for the year, but the potential for a \u201chigher high\u201d at the pump remains as drivers head into the U.S. summer driving season. U.S. gasoline prices hit a peak of $3.6855 a gallon on April 20, and that looks to be the top of the market […]<\/p>\n","protected":false},"author":1,"featured_media":10229,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-10228","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nHere\u2019s what might lead to a spike in gasoline prices this summer | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Retail gasoline prices may have already seen their peak for the year, but the potential for a \u201chigher high\u201d at the pump remains as drivers head into the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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