Gas Prices Not Going Down Without a Fight

Just when you thought it was safe to buy that V-8-powered SUV, global oil prices jumped unexpectedly and are causing at least temporary increases in gasoline prices.

Oil prices shot up earlier this week after the Energy Information Administration reported that U.S. crude oil inventories rose less than expected and oil production had dropped. As a result, wholesale gasoline prices also went up, and motorists should see higher pump prices in the coming days.

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“There is a good chance that many drivers will wake up to higher gas prices because crude oil is suddenly more expensive. Average retail gas prices could rise 5-10 cents per gallon as refineries process the more costly crude oil,” AAA spokesman Michael Green said in an email.

Motorists were already feeling the impact in the central part of the country Thursday. Since Wednesday, pump prices for regular gas on average rose 4 cents in Illinois, Minnesota and Missouri, 6 cents in Indiana and 9 cents in Ohio, according to the AAA Daily Fuel Gauge.

A week earlier, the outlook was rosier. GasBuddy.com was postulating that gas prices may already have peaked for 2015, and the EIA was forecasting that pump prices during the summer could be the lowest since 2004. The national average for regular unleaded reached $2.47 on March 6 as the high point for this calendar year.

AAA said the national average for regular gas was $2.41 Thursday, just a penny higher than a week ago, though it should go higher in the coming days. Diesel fuel prices continued to decline, falling 2 cents the past week to a national average of $2.78.

One of the key drivers of low oil prices over the past several months was that U.S. oil production was humming along, adding to a global glut of oil. But the cost of producing oil is more expensive in the U.S. because it requires hydraulic fracturing (or “fracking”) and other methods that add cost. Falling oil prices made it uneconomical to extract as much oil in the U.S., so oil production has dropped in recent months.

That has increased speculation that the global supply of oil will become more in line with demand, and that oil prices will rise later this year. The OPEC oil cartel predicted Thursday that U.S. oil supplies would decline in the second half of 2015 and that demand for oil produced by OPEC members would increase.

Meanwhile, U.S. motorists are still paying far less for gas than they have in recent years. The national average for regular is about $1.25 less than it was at the same time in 2013 or 2014 and around $1.65 less than in 2012. Diesel is $1.18 less than a year ago on average.

The cheapest gas prices were in South Carolina, where regular was averaging $2.13, followed by Tennessee at $2.18, and Alabama and Mississippi at $2.19.

California and Hawaii were tied for the most expensive gas at $3.09, followed by Alaska at $2.97.