Since Memorial Day weekend, the national gas price average has increased 13 cents to $3.17. That is 98 cents more than a year ago, but 41 cents cheaper than this time in July 2014, when the national average was last above $3 per gallon, according to AAA.
One of the primary reasons for more expensive gas prices this summer is high crude oil prices. However, last week crude prices fluctuated from a high of $75/bbl down to $71/bbl. News from the Organization of the Petroleum Exporting Countries (OPEC) over the weekend, that they have reached a deal to increase production in August, could give crude oil prices the potential to drop under $70/bbl. Regardless, AAA expects higher pump prices to be the norm throughout the summer.
“It’s a cruel summer at the gas pump with prices showing little signs of relief,” said Jeanette McGee, AAA spokesperson. “However, the more expensive prices aren’t stopping motorists from filling-up based on strong gasoline demand numbers.”
While gas demand dipped to 9.28 million b/d, in the Energy Information Administration’s (EIA) latest report, the rate is strong for summer. The EIA report also shows gasoline stocks increased by 1 million bbl to 236.5 million. The jump in supply and drop in demand mitigated fluctuation to the national gas price average, which had a two-cent increase on the week. During the last seven days, 25 state averages increased by at least two cents, with 11 of those seeing jumps of a nickel or more.
The nation’s top 10 largest weekly increases: Ohio (+11 cents), Michigan (+10 cents), Utah (+10 cents), Nevada (+8 cents), Kansas (+8 cents), Idaho (+7 cents), Illinois (+6 cents), Wisconsin (+5 cents), Wyoming (+5 cents) and North Dakota (+5 cents).
The nation’s top 10 least expensive markets: Mississippi ($2.78), Louisiana ($2.81), Alabama ($2.83), Texas ($2.83), Missouri ($2.84), Arkansas ($2.85), Oklahoma ($2.87), Tennessee ($2.88), North Carolina ($2.90) and South Carolina ($2.91).
Oil Market Dynamics
At the close of Friday’s formal trading session, WTI increased by 16 cents to settle at $71.81. Although prices fluctuated at the end of the day because of a stronger dollar, crude prices declined on the week due to supply concerns and tension between Saudi Arabia and the United Arab Emirates that prevented OPEC and its allies from reaching a deal to increase crude production.
However, under the compromise, which media reports confirmed over the weekend, OPEC will increase daily crude production by 400,000 barrels in August. The increase is expected to help lower crude prices, assuming it is not met with higher demand. Crude prices could decline this week in anticipation of the production increase.