The average price of a gallon of conventional gasoline in the United States has increased by nearly 30 cents over the past month, reaching $3.82 per gallon.
AAA reports that the average price of gasoline in Midwestern states has increased between 18 cents and 25 cents over the past year. California and Washington have the nation’s most expensive petroleum, with prices averaging $5.00 per gallon. Mississippi has the nation’s cheapest petroleum, with an average price of $3.32 per gallon.
Clearly, petroleum prices today are significantly lower than they were in June 2022, when they reached an all-time high of $4.62 per gallon. Back then, petroleum prices in the United States were inching closer to $5.00 per gallon, limiting Americans’ summer travel plans. According to data from the Federal Reserve Bank of Kansas City, rising petroleum prices were a significant contributor to the soaring inflation Americans experienced for most of last year.
As summer drew to a close and fewer motorists took to the road, the national average price for gasoline began to decline by mid-August. Typically, when petroleum prices rise, the cost of energy is the primary cause. However, energy prices are only part of the story this month. Here are three causes for the increase in petroleum prices.
In many regions of the country, including Arizona, Texas, and New Mexico, July was one of the warmest months on record. For instance, Phoenix experienced a record-breaking 31 consecutive days of 110-degree daytime temperatures.
According to Kris Van Cleave, senior transportation correspondent for CBS News, oil refineries were forced to curtail their output due to the high temperatures, as many of them can only operate between 32 and 95 degrees. He stated that the reduction in output caused gas prices to rise.
Andrew Gross, a spokesperson for AAA, stated in a recent analysis, “Last month’s extreme heat contributed to the recent spike in gas prices due to some refineries pulling back,” adding that refineries are now beginning to return to normal operations.
Escalating oil costs
Recent crude oil prices have fluctuated around $80 per barrel, up from roughly $70 per barrel one month ago. Typically, when global oil prices rise, gasoline prices also increase. Russia, the world’s third-largest oil producer, decided last month to reduce output beginning in August, which has contributed to the increase in oil prices.
Analysts at the investment bank UBS anticipate a $85 to $90 increase in crude prices in the future months due to increased oil demand.
Declining crude output
The second-largest crude producer, Saudi Arabia, reduced its oil exports last month. It reduced production by 1 million barrels per day in an effort to maintain high crude prices. This week, the kingdom announced that it would extend its production cut until the end of September.
“This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets,” a Saudi Energy Ministry official said Thursday, adding that the cut “can be extended or deepened” if necessary.
The Saudis are eager to increase oil prices in order to finance Vision 2030, an ambitious plan to restructure the kingdom’s economy, reduce its reliance on oil, and create employment opportunities for its youthful population.
Source: CBS News