Gas Prices Remain High in Short Term, Low in Long Term

img 894452616 1464919580098 jpg photo by Angela Conner

CARS.COM — Gas prices inched upwards the past week to a new high mark for 2016, but the cost of filling up at the start of the summer driving season was still the lowest it has been in 11 years. The AAA Daily Fuel Gauge Report said Thursday that the national average for regular gas was $2.33 a gallon, up 2 cents from a week ago. That’s 43 cents less than a year ago and the lowest post-Memorial Day average since 2005.

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Gas prices typically peak for the year by the end of June, after refineries have completed seasonal maintenance and get back to full production to meet the higher demand of the summer driving season. Though analysts have predicted that should be the case again this year, things may not be so simple.

First, oil prices have moved higher in recent weeks, hitting $50 a barrel in the U.S. last week for the first time in nearly nine months; U.S. oil was trading at more than $48 a barrel early Thursday. Second, Americans are driving more than ever, and low fuel prices have encouraged drivers to ditch cars in favor of SUVs and pickup trucks that burn more gas, boosting demand. The U.S. Department of Transportation reported that Americans drove 746 billion miles in the first quarter, up 4 percent from 2015, a record year for miles driven.

Those factors, plus the possibility that weather, instability in the Middle East or other factors could disrupt the supply of oil, have made analysts more cautious about future pump prices.

“As refiners get back online, supply will likely not erode as quickly, leading to gasoline prices stabilizing or even falling,” analyst Patrick DeHaan stated in a blog post. “However, with demand likely to be at record levels, any kink in gasoline supply could have a chilling effect on gasoline prices.”

AAA said in a statement: “This year’s summer driving season is expected to be characterized by higher-than-normal gasoline demand, and demand remains on pace to test record levels reached in 2007. Refineries nationwide are working in preparation for what is likely to be a record-breaking season and if they are able to keep pace, pump prices should remain relatively lower.”

AAA warned that the Atlantic Ocean hurricane season will last the next six months, and the U.S. gasoline supply could be crippled if any hurricanes strike the Gulf Coast region. The Gulf Coast has more than 45 percent of the U.S. petroleum refining capacity.

“Severe weather can disrupt operations in this region, which can lead to shortages in supply, and historically we have seen this lead to spikes in the price at the pump nationwide,” AAA said.

As pump prices continued to rise, the cheapest gas was still found in Southern states. Mississippi and South Carolina had the lowest statewide averages for regular at $2.10 a gallon, according to AAA. Regular averaged $2.11 in Missouri and $2.12 in Arkansas and Texas.

California still had the most expensive gas, with a statewide average of $2.81 for regular, but prices there have stabilized in recent weeks as an ExxonMobil refinery near Los Angeles resumed full production after more than a year of limited operation. Regular averaged $2.50 or more in Alaska, Hawaii, Nevada, Washington state and Washington, D.C. Prices retreated in Indiana, Michigan and Ohio the past week following a two-week period in which average prices jumped 30 cents or more because of supply issues caused by refinery outages.

The national average for premium gas was $2.79 a gallon on Thursday, according to AAA, up 2 cents from a week ago. Diesel fuel averaged $2.33, up 3 cents.

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