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Although gasoline prices have dropped in the last two months, they are expected to rise again in the United States and could reach a national average of $4 per gallon.
Despite the worrying news, there is an upside as prices won’t likely stay there for long.
In areas where they are high, gas prices are already falling.
Gas prices
On Monday, the national average price for a gallon of regular gas was $3.92.
The price is up 12 cents over the past week and 24 cents after ending the 98-day price decline late last month.
The increase is partly due to the fact that OPEC+ cut production by 2 million barrels per day to raise prices.
In the United States, the high prices can be attributed to reduced refining capacity, as several West Coast refineries were offline due to accidents or maintenance work.
According to Tom Kloza, global head of energy analysis at OPIS, nearly 18% of the country’s refining capacity was offline when OPEC announced the cut.
OPIS tracks gas prices for AAA.
With refineries returning online, gas prices on the US West Coast are already falling.
Price drops
According to the AAA, prices in California, which accounts for nearly 10% of the country’s gas consumption, fell 5 cents last week.
However, at $6.33 per gallon, California still has the highest average gas price in the United States.
After California and Alaska, Oregon has the third highest price, but prices also fell 10 cents to $5.53 a gallon.
Analysis
“East of rockies prices have been rising,” noted industry analyst Andy Lipow.
“But west of Rockies, the prices are already falling now that the refinery outages are ending.”
Lipow speculates that the national average is skirting around the short-term peak.
This week’s average is also expected to fluctuate between $3.95 and $4 per gallon before starting to fall again.
Andy Lipow said prices east of the Rocky Mountains will likely follow prices west and start falling next week.
He thinks the national average could drop to $3.80 a gallon by Halloween.
Prices across the United States
About 25% of the 130,000 gas stations in the United States currently sell regular gasoline for $4 or more.
The numbers are down 15% since the end of the price slide last month.
Thirteen states currently have national averages above $4 per gallon, including:
- Alaska
- Arizona
- California
- Hawaii
- Idaho
- Illinois
- Indiana
- Michigan
- Montana
- Nevada
- Utah
- Oregon
- Washington
Demand
According to Lipow, the OPEC+ cut is already locked in at current prices, so oil traders will be anticipating demand.
Demand is expected to suffer a blow as recession fears have increased in the United States and around the world.
Recessions typically reduce demand as fewer people have jobs to commute to and consumers limit overspending.
Gas is a necessity that consumers buy at any price, what economists call an “inelastic” good.
However, Lipow pointed out that consumers were driving less after the U.S. median price hit an all-time high of $5.02 in mid-June.
Consumption fell nearly 6% a month later.
He added that winter heating bills, which will be higher than last year, will likely result in even greater savings.
Andy Lipow also noted that homeowners don’t see the monetary value when adjusting their thermostats.
“But at the gasoline pump, you do see the price, and you can decide to cut back on what you spend.”
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