Regional factors along with the recent OPEC deal push gas prices upward.
Pump prices continue to move higher across the nation, with the average price of regular unleaded gas growing for 28 of the past 30 days to $2.29 per gallon as of Dec. 26—up 29 cents compared to this time last year, according to a report by AAA.
Nonetheless, AAA pointed out that U.S. drivers are expected to pay the second-cheapest New Year’s Day gas prices since 2009, when the national average was $1.62.
In 2017, demand for gasoline is expected to “drop dramatically” in January as the busy holiday travel season comes to an end. Over the past five years, the average drop during that period has been about 15-million gallons, according to OPIS, which is expecting a larger drop in 2017.
Regional refinery issues on the West Coast combined with strong demand and exports out of the region have caused supplies to decline. Oil prices along with a drop in supplies and increase in demand over the busy holiday travel period are likely to result in rising gas prices heading into 2017, AAA noted.
Meanwhile in the Mid-Atlantic and Northeast, gas supplies are ample, but record-breaking travel numbers during the holiday season will likely continue to pressure gas prices at the pump higher.
Oil Market Dynamics
At the end of November, Organization of Petroleum Exporting Counties (OPEC) along with non-cartel countries agreed to limit crude oil production by 1.8 million barrels per day beginning in January 2017. This attempt at limiting oil production is meant to rebalance the oil supply. In response, markets have reacted, causing retail prices to increase.
Whether or not the deal is successful remains to be seen. AAA reported that last week Libya announced the re-opening of pipelines from two major oil fields. Speculation abounds that increased production in Libya could counter OPEC’s anticipated cuts.
