Gas Prices Climb 30 Cents a Gallon
NEW YORK (CNNMoney) — Gas prices continued their slow but steady march higher Tuesday, surpassing a nationwide average of $3.63 cents a gallon on the back of refinery problems in the United States and higher crude oil prices globally.
Nationwide average gasoline prices are now 30 cents higher than they were just five weeks ago. They are now at the midway mark between this year’s high price of $3.94 a gallon — hit April 5 — and the recent low of $3.33 hit just over five weeks ago, according to AAA.
By this weekend, gasoline prices will likely be higher than they were a year ago at this time, according to Tom Kloza, chief oil analyst at the Oil Price Information Service.
The rise is being partly driven by a series of refining and transportation problems in the Midwest and on the West Coast.
Last month an Enbridge pipeline was shut down in the Midwest after a leak. July also saw problems at a BP refinery outside Chicago, and at a Marathon refinery in the region, said Kloza.
Worse, on Monday night a massive blaze shut a Chevron refinery in California — the state’s second largest. Kloza said gasoline futures in the state spiked 30 cents a gallon Tuesday.
Oil’s rise: Crude oil prices have also rallied recently, jumping nearly 20% in under six weeks.
Traders have blamed a host of things on the runup.
Fears over a confrontation with Iran were cited last month, while more recently the chaos in Syria is making markets nervous about any spillover effect to the broader region — home to 60% of the world’s oil reserves.
While the economy remains lackluster, speculation that central banks will ease monetary policy has helped fuel a jump in both stock and commodity prices across the board, including oil.
Tropical Storm Ernesto and some production problems in the North Sea also appear as factors.
Even recent reports of declining factory orders in Germany and construction activity in Italy have failed to dampen oil prices, said Matt Smith, a commodities analyst at Summit Energy in Louisville, Ky.
“A market that doesn’t sell off on bearish news is not bearish,” Smith wrote in a research note Tuesday. “Hence we must accept that this recent rally in crude is not quite over yet.”
Crude’s influence on gasoline prices may be waning though.
Kloza said he expects gas prices to tick marginally higher for the next couple of weeks, but not to approach the $4 mark. Still, it will likely be fodder for political debate.
“As we enter the [political] convention periods, this will lead to a cluster of rhetoric on both sides,” said Kloza.
The $4 mark is the level many economists think caused consumers to really pull back spending on other items, thus cutting into economic growth.
After Labor Day, Kloza said gasoline prices should start declining, no matter what happens to the price of crude.
“The one caveat is tropical storm season,” he said. “If [forecast] cones start to shadow the Gulf Coast, you’ll see rallies.”
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