AAA & GasBuddy: Gas Prices Will Soon Pass 2020 Highs
Car Pro | February 25, 2021
AAA reports that the national gas price average as of 2/25/21 is $2.678 a gallon. In Texas that price is slightly lower at $2.396, up from a week ago. In California, the price is higher than the national average at $3.630, also up from a week ago.
Gas prices are on the rise around the nation and motorists are filling up to some of the most expensive gas prices seen in over a year, according to American Automobile Association. One immediate culprit is the Winter Storm Uri last week which forced the shutdown on some Gulf Coast and Mid-West refineries. Outages were reported in Texas, Louisiana, Oklahoma, Arkansas, Tennessee and Kansas. February 22, the American Automobile Association reported that on the week, 66% of state averages spiked by double digits (10–22 cents), driving the national average up by 13 cents to $2.63 -- the most expensive national average since October 2019.
“When close to 40% of U.S. crude production is offline because refineries are closed, there is going to be pain at the pump until operations resume,” said Jeanette Casselano McGee, AAA spokesperson. “The good news is the nearly two dozen impacted refiners are expected to restart operations this week, if they haven’t already. That means regular gasoline deliveries will resume and impacted stations will be re-fueled.”
The winter storm-resulting spike in prices comes on top of AAA’s earlier report that already warned of higher gas prices on the way. On February 16th AAA reported that crude oil and pump prices will soon be more expensive than the highest price of 2020 despite low demand. At the end of the week prior to Feb 16th, crude was priced at $59.47/bbl. That’s just under $4/bbl less than last year’s most expensive price of $63.27/bbl (seen on January 6, 2020). Since the end of November, AAA says it’s seen the price of crude increase as much as $5/bbl a week.
February 16th, AAA reported that with the price of crude consistently increasing, so too have gas prices because crude oil accounts for more than 50% of the price at the pump. It said that nearly 40 state gas price averages are already more than last year, with half of those averages seeing double-digit increases.
“Crude, not demand, has been the main factor driving gas price increases this year,” said Jeanette Casselano McGee, AAA spokesperson. AAA says demand has averaged 7.7 million b/d since January. The last time it measured below 8 million b/d during the first six weeks of the year was 2001.
AAA explains that just how expensive gas will get this year is largely dependent on crude price and demand. The price of crude is still $10–$12/bbl less than when the national average was last near $3/gallon in 2018. In order for prices to be that expensive again this spring or summer, AAA says it believes that a major spike in demand, returning to normal peak driving season levels, and crude sustaining at very high prices will be required.
GasBuddy concurs with AAA’s prediction of higher prices. GasBuddy.com says an increase in prices could lead the national average to rise to $2.65-$2.75 per gallon, which would be the highest gas prices since 2019 and the highest seasonal prices in over five years.
According to GasBuddy’s February 17th analysis, 11 refineries in Texas and one in Kansas were partially shut due to the extremely cold weather. At that time, GasBuddy calculations showed that 3.48 million barrels of refining capacity were offline as of last Tuesday (February 16), or nearly 20% of total U.S. refining capacity, just under the amount shut down due to Hurricane Harvey in 2017.
“The quicker the affected refineries are able to come back online, the better, and perhaps less painful for motorists than if they remain out of service for even longer,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “Oil prices have continued to rally as global oil demand recovers from the worst of the COVID-19 pandemic, and now the extreme cold weather shutting refineries down, us motorists just can’t seem to catch a break. We probably won’t see much, if any relief, anytime soon.”
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