Prices at the pump are expected to top $3 a gallon for unleaded gasoline in many parts of the country in the next few weeks, as summer driving season approaches.
“Right now we have nine states above $3. I think we might see about half of the states get to $3,” said Tom Kloza, global energy analyst at Oil Price Information Service. “The region that will see the biggest increase soon is the northeast because we’re switching to summer gas.”
For a national average price, “I think probably it’s a better than 50/50 chance that the U.S. surpasses $2.80 as an average,” Kloza said.
The national average for unleaded gasoline was $2.73 per gallon Wednesday, up a penny from Tuesday but seven cents higher than last week, according to AAA. Gasoline prices have been moving up steadily with the price of oil, and are now up 33 cents from last year’s levels and almost 20 cents from just a month ago, according to AAA data.
Demand for gasoline hit a record level at 9.86 million barrels a day last week, according to government data. But energy analysts say the number could be artificially high because some exports may not have been reflected, which would have reduced the number.
Even so, the signs of high demand for fuel are there, and analysts said it may be tax cuts encouraging consumers to drive more and the fact that unemployment is low. Drivers are also favoring sports utility vehicles over cars.
Kloza notes the previous high for demand was just over 9.8 million barrels per day last summer, noting there has never been a number that high before Memorial Day.
“There’s good demand here, and worldwide demand for oil is going up, we could hit $2.90 as a national average,” said Andrew Lipow, president of Lipow Oil Associates. The last time gasoline was at $2.80 per gallon was in the summer of 2015, and it’s quite possible gasoline prices this year could surpass that to a four-year high this summer.
The EIA said it expects unleaded gasoline to average $2.74 per gallon in the summer driving season from April through September. The average last summer was $2.41 per gallon.
Gasoline prices in the futures market jumped Wednesday, after Energy Information Administration data also showed a big draw down in gasoline supply of 3 million barrels. Analysts had expected a decline of 227,000 barrels. RBOB gasoline futures were up 1.5 percent to $2.07 per gallon.
“There was really strong demand for gasoline, summer-like demand for gasoline,” said John Kilduff, energy analyst with Again Capital. “We’re seeing big volumes of exports too. That’s adding to overall demand.”
According to EIA, the U.S. has been a net exporter of gasoline for the past two years. Last week, the U.S. exported 647,000 barrels a day of gasoline, with the likely destination Mexico and South America.
“We already have record crude oil production. We’re going to have record gasoline demand and we’re also going to have record refinery runs. With these numbers and substantial profits out there, particularly for diesel, we’re going to blast through the records that were established last year for refinery runs,” said Kloza.
Kloza said refinery runs could go from about 17.1 million barrels a day to above 18 million this summer.
“[Gas prices] will probably peak in July,” said Lipow. “Not only is the consumer going to be paying more for their gasoline but for airline tickets…The price of both jet fuel and diesel fuel continue to rise.”
The U.S. also exports both jet fuel and diesel fuel. “Diesel prices are certainly likely to rise another 10 to 15 cents a gallon as well,” Lipow said. Diesel was $3.01 per gallon Wednesday, up nearly 50 cents a gallon from a year ago, according to AAA.