Gas Prices Inching Higher, but This Isn't 2022

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. drivers saw a recent uptick in retail gasoline prices, as a spike in crude oil prices countered lackluster demand. But some relief might be in sight as refinery maintenance slows down, data show.

Motor club AAA listed a national average retail price of $3.53 for a gallon of regular unleaded gasoline on March 22, up some 26 cents from one month ago and 10 cents higher per gallon than this time last year.

Some regional markets, particularly in the U.S. Midwest, saw elevated retail prices because of refinery woes. BP plc's (NYSE:BP) (London, England) refinery in Whiting, Indiana, the region's largest with a capacity of 430,000 barrels per day (BBL/d), lost power in early February and did not return to full rates until March 12, according to Industrial Info.

That left many regional states with gasoline prices well above the national average, and it may take a while for the market to react to Whiting's return. A March 14 alert from Industrial Info showed the refinery had begun limited operations of most units early in the week of March 4 in preparation for the complete restart that was achieved March 12. Partly as a result, Illinois is reporting a state-wide average that's almost 40 cents per gallon higher than the national average. Should the trends continue, it could undermine U.S. economic performance during a heated election year.

Retail gasoline prices can be synonymous with consumer-level inflation, as they're among the most ubiquitous indicators of economic health. Higher gasoline prices mean less discretionary cash, something U.S. President Joe Biden sought to alleviate by releasing oil from the nation's strategic stockpiles.

"Energy security is the sine que non for every reigning government," wrote Tamas Varga, an analyst at London oil broker PVM. "Whether it means adequate supply or relatively low pump prices is open to interpretation, although the two go hand-in-hand most of the time."

Though downplayed because of price volatility, the energy component of the U.S. Consumer Price Index reversed course from a 3.2% month-on-month decline in January to a 3.6% increase in February.

Energy prices could in theory moderate, but don't discount a geopolitical premium on crude oil prices. Ukrainian drone attacks, meanwhile, have disrupted flows of refined petroleum products in Russia, curbing what's available on the global market.

Few forecasts, however, suggest broader prices will see a repeat of 2022, when oil prices spiked above $100 per barrel. Gasoline prices passed $5 per gallon that same year as global markets adjusted to the loss of Russian products due to sanctions imposed over the war in Ukraine.

And while a switch to a summer blend of gasoline, which is more expensive to make, is on the horizon, Industrial Info data show something of a slowdown in planned and unplanned refinery outages.

For gasoline-making FCC units, Industrial Info's data show outages peaked in mid-February, with some 886,000 BBL/d of processing offline on average. For the last week of March, that could be closer to 264,000 BBL/d, with most of that in PADD V, which covers the U.S. West Coast.

The U.S. Energy Information Administration predicts retail gasoline prices will average $3.50 per gallon this year before dropping to $3.40 per gallon in 2025.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).