The prospect of summer motorists swarming America’s highways leads to sharp hikes in gasoline prices, a sign of economic recovery and a boon for the pandemic-ravaged energy industry.
Supported by the oil recovery and growing consumer demand, gasoline pump prices in the United States have averaged $ 2.88 per gallon over the past week, according to the AAA. That’s about a third from the same time last year, when pandemic lockdowns criticized fuel consumption.
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after a murderous year, helping to make energy shares the best performing sector this year in the S&P 500. An indicator of refiner profit margins, calculated from the spread between gasoline futures and crude oil, recently approached its highest level in three years at over $ 24 a barrel.
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Drivers are already paying well over $ 3 a gallon in some states. In California, the most expensive market, average prices are $ 3.88, according to AAA. Motorists in Mississippi, Texas and Ohio, on the other hand, pay closer to $ 2.60. Gas prices vary widely due to factors such as tax policies and proximity to pipelines.
Some analysts see further gains to come. Prices tend to climb closer to summer, when millions of Americans are on vacation and oil refiners mix in more expensive fuel that doesn’t evaporate in the heat.
The surge in gasoline prices joins a recent rally in other commodities such as copper, as well as improving data on jobs and spending, indicating the economy is gaining momentum . At the same time, high fuel prices are biting some consumers and businesses while adding to concerns about rising inflation.
In Colorado, where gasoline prices have climbed nearly 40 cents a gallon in the past month, landscaper and tree surgeon Allan Trujillo is feeling the pinch. Mr. Trujillo drives a 1996 Ford Econoline to work from his home in Arvada and operates fuel-consuming machinery, including chainsaws and electric string trimmers. He said he is currently spending around $ 100 a week on gasoline, compared to around $ 60 normally at this time of year.
“It just seems a little too early in the year” for gasoline prices to go up, said Trujillo, 45. “When we want to go to more remote places, it will definitely cost us a little more.”
A rebound in crude oil prices and a sharp drop in the quantity stored are behind the rise in gasoline. The price of West Texas Intermediate crude has risen more than 60% since late October to over $ 60 a barrel, even after a recent drop. Crude represents 56 cents of every dollar spent by consumers on gasoline, according to the Energy Information Administration.
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Crude prices jumped 5.9% on Wednesday after a gigantic container ship blocked traffic in the Suez Canal, a vital artery for the international oil market. Seven laden tankers carrying a total of 6.3 million barrels of crude oil were near the entrance to the canal, Kpler said, waiting to pass. If the ship is not dislodged by the end of the week, three other tankers carrying an additional 2.5 million barrels will join them, estimates the cargo tracking company.
Refiners slowed production last year in response to falling prices and weak demand. The winter frost that hit Texas in February then knocked out some of the nation’s biggest. This combination pushed motor gasoline inventories below normal levels for March.
Today, many observers expect a nascent recovery in fuel consumption to accelerate due to restrictions on ease of movement. Rising prices could then encourage refiners to produce more fuel to cope with the surge, analysts said.
“The market tells me I need to open my refinery and run it as hard as possible,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Can we push north of $ 3?” Absolutely, ”Mr. Tran said.
The prospect of a sustained increase is for Lauren and Peter Long, whose family raises cattle and horses just north of Jackson Hole, Wyo. Come summer, the couple will drive the 35 miles from home to the ranch most days before trading in their Jeep Cherokee and Chevrolet. Equinox for vehicles beaten to move on their 400 acre plot.
“It’s going to be very expensive,” said Ms. Long, 34.
Another concern is that driving fees in the mountains could deter potential guests from renting the ranch as a venue for weddings or business events in the coming seasons. A long family trip to Yellowstone National Park might be irrelevant if prices continue to rise, Ms. Long said.
Diesel prices have also gone up. This is an unwanted development for Jerry Boyce, owner of Hallmark Construction Inc., based in Nampa, Idaho.
“That little dollar adds up very quickly,” said Boyce, 44. Hallmark has been a victim of rising diesel prices so far, but will charge customers more if they stay high, he added.
Analysts are assessing whether consumers will respond to rising gasoline prices by reducing their driving. In a 2019 poll, 44% of respondents said they would change their habits if prices rose to $ 3 a gallon, according to Jeanette Casselano McGee, a spokesperson for the AAA.
Many observers expect drivers to be less price sensitive this year with the lifting of pandemic restrictions.
“People are tired of lockdowns and they desperately need to get out,” said the mayor of Regina, global energy manager at KPMG. Still, she believes March could see the highest prices of the year as refiners stand ready to act to replenish supplies.
Another factor that could limit gasoline prices: Many Americans are either working from home or unemployed, reducing the demand for gasoline by commuters.
Write to Joe Wallace at [email protected]
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