Gas Prices Set to Jump as Refinery Outages Nip Supply


American drivers are poised to face a significant surge in gasoline costs in the upcoming weeks due to substantial refinery shutdowns, resulting in diminished supplies just ahead of the usual spike in demand, analysts have observed. The average national price for a gallon of gasoline has risen by over 9% since the beginning of the year, settling around $3.40 since March 8, marking the highest figures seen since early November, as indicated by data provided by the automobile association AAA.

The escalation in gasoline expenses has notably contributed to a firm uptick in consumer prices over the previous month, further solidifying the persistence of inflationary pressures in the United States. This aspect is expected to emerge as a focal point for deliberations among both the Democratic and Republican camps in the lead-up to the presidential elections slated for November this year.

According to reports from the U.S. Energy Information Administration this week, gasoline inventories in the country recorded a substantial decline of 5.7 million barrels, plummeting to 234.1 million barrels in the week ending March 8. These figures underscore a deficit of more than 2% compared to the seasonal average over the past five years.

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Tom Kloza, the chief of energy analysis at Oil Price Information Service, emphasized the likelihood of gasoline prices surging even further in the foreseeable future. He pointed to various factors including heightened travel demand during the summer season, dwindling fuel reserves, and challenges faced by refineries worldwide.

The operational rates of refineries across the United States have persistently remained below the 87% mark for eight consecutive weeks, marking the lengthiest such period since 2021. Projections from research firm IIR Energy suggest that approximately 1.2 million barrels per day (bpd) of the country’s total capacity of roughly 18 million bpd will be offline during the current week, with a further reduction to 885,000 bpd anticipated for the following week.

The recent onslaught of Ukrainian drone attacks on Russian refineries has exacerbated existing apprehensions regarding supply disruptions, consequently leading to an upward trajectory in fuel and crude oil prices. Prior to these attacks, oil prices were already on the rise due to sustained production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allied nations. In light of these developments, the EIA revised its forecast for retail gasoline prices for the current year, raising it by 20 cents to $3.50 per gallon on Tuesday.

Reflecting the mounting pressures, prices of U.S. crude oil witnessed a notable surge on Wednesday, with a $2.16 increase bringing the settlement price to $79.72 per barrel, while Brent crude also climbed by $2.11, reaching $84.03 per barrel.

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