A concoction of ingredients are behind a cocktail of increasing gasoline prices, and the higher prices at the pump are not expected to ease anytime soon.
Skylar McKinney, AAA regional director of public affairs, said the main reason behind the pain consumers are feeling at the pump is rising crude oil prices.
Other factors – the unusual cold snap in the states along the Gulf of Mexico and an anticipated rise in summer travel with wider distribution of the COVID-19 vaccination – are also behind rising prices, McKinney said.
“The bet here is that they’re going to continue rising for the foreseeable future,” he said. “The era of extremely cheap gas prices are going to be behind us for a little while, at least.”
Crude oil was trading slightly above $66 a barrel Friday, the highest price in more than two years. The price had dropped to $65.08 on Monday morning.
“The OPEC countries plus Russia and a few others, they have not increased production. They’re going to do just a very, very, very slight increase in April,” he said. “But they are making the choice to drive prices up after what has been a rougher year for the oil-producing countries.”
Last week, OPEC countries decided to extend an oil production cut for another month despite a resurgence in global demand as economies recover from COVID-19, said Patrick De Haan, head of petroleum analysis for GasBuddy.
“It’s extremely frustrating as a consumer to feel helpless as prices soar and as millions remain unemployed, so the only advice I can offer consumers is prepare for further increases, and to mitigate rising prices,” De Haan said in a news release. “Shop around for the low prices every time you need to refuel.”
On Monday, gas prices had risen to as high as $2.95 for a gallon of regular unleaded at Marathon and some Speedway gas stations in Durango. A gallon of regular unleaded was selling for $2.75 at Peerless.
A big jump in gas prices came right after the mid-February freeze that hit Texas and Louisiana. The storm shut down many refineries along the Gulf of Mexico.
The largest refineries in North America were shutting down because of arctic conditions that cut electricity, water and fuel supplies across Texas. More than 3 million barrels of daily oil-processing capacity were taken down in the wake of the record-setting cold, according to consultant Energy Aspects Ltd.
The storm hit also as rising demand across the country began to be felt with COVID-19 vaccine distribution.
“We are seeing demand rise. That’s great. It usually is a sign of a recovering economy, especially in light of a pandemic,” McKinney said. “Many more people are driving, and as more people become comfortable flying, that’s going to increase demand for crude oil, too.”
Another factor driving up prices is the uncertainty surrounding President Joe Biden’s policy toward oil drilling, McKinney said.
In January, the Biden administration issued an executive order suspending new oil and gas leasing on federal land, and during the campaign Biden pledged to stop drilling on federal lands and offshore.
The consulting firm Rystad Energy says a de facto ban on new leasing on federal land is now reality, but that the oil industry has also insulated itself from immediate impact.
Oil companies used the final months of the Trump administration to stock up on permits. Federal permitting in New Mexico – a hotbed of Permian Basin drilling on federal land – more than tripled from 2017 to 2020, according to Rystad Energy.
McKinney said: “There is a moratorium on issuance of new permits, it gets covered a lot, but I don’t think that’s been a big driver of the price increase. I don’t think there’s going to be a shutdown of drilling or fracking. There might be more a promotion of alternative fuels, but the uncertainty is about policy is what’s new, and that would be true of any new administration, regardless of party early on.”
The combination of factors is likely to push the average cost of a gallon of gasoline in Colorado to $3 a gallon by summer, McKinney said.
“I would say that we’re going to see prices rise. A national average of about $3 sounds about right to me. We haven’t seen that in about three years, since May 2018,” he said. “But I don’t think we’re going to see $3.50 a gallon. We probably won’t even see $3.25 in most of Colorado, but places like Telluride, Aspen and Vail and other resort communities might be the exception.”
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