Prices remain distorted by the Colonial fuels pipeline outage and an extraordinary spike in gasoline demand.
US Gas Prices Surge To $3.07 Per Gallon Ahead Of The Busy Memorial Day Holiday Weekend
Seasonal demand increases ahead of the Memorial Day holiday weekend and a gasoline market caught on the back foot means pain at the pump for travelers, analysts told Zenger News.
That pain was clear when automotive club AAA reported a national average retail price for a gallon of regular unleaded at $3.07 on Tuesday, the most expensive it’s been since 2014. With travel sidelined by the pandemic, the average price at this point last year was $1.96 per gallon.
With U.S. vaccination efforts increasing, state and local governments are relaxing mask mandates and other social restrictions, and it may seem extraordinarily busy for travelers this weekend.
Tom Kloza, the chief oil market analyst for the Oil Price Information Service, told Zenger from New Jersey that wholesale prices were all over the map, leading to big swings in retail prices.
Reflecting on the outage of the Colonial fuels pipeline — an artery pushed offline by a ransomware attack early this month — Kloza said most commuters appeared to have relaxed and stopped the panic buying that left several stations in the U.S. southeast without gasoline.
That buying crunch has now passed, but federal data out later this week is expected to also show the extraordinary surge in consumer demand, Kloza said.
The federal government last week reported the total volume of petroleum products supplied to the market over the four-week average, which is a barometer for consumer demand, was 19.2 million barrels per day. That was up 19.1 percent from the same time last year, though that was skewed not only by the Colonial Pipeline outage, but also by the pandemic strains from 2020.
The four-week average for total products supplied during the similar week in 2019 was 20.1 million barrels per day, showing that demand has yet to reach pre-pandemic levels.
Patrick DeHaan, the senior petroleum analyst at GasBuddy, said from Chicago that a melange of disruptions in the energy market — from the recent Colonial pipeline outage to last year’s pandemic-related disruptions — meant producers were left flat-footed when demand surged.
Those two factors, he said, mean gasoline prices at the retail level are higher than would normally be justified under current economic conditions.
“If this was pre-COVID, prices would probably be 20-30 cents per gallon less,” DeHaan said.
Patricia Hemsworth, a senior vice president at Paragon Markets, added that global issues are also weighing on markets, as countries such as India continue to buckle under pandemic pressures. But at home, she said, federal data this week on demand could be misinterpreted because of the distortion from the Colonial fuels pipeline.
“Gasoline has been having sort of a sloppy price action,” Hemsworth said from Brooklyn.
AAA anticipates some 37 million people will be traveling this upcoming holiday weekend — a 60 percent increase from last year, when the summer was marred by the COVID-19 pandemic.
(Edited by Bryan Wilkes and Alex Willemyns)