A steady decline in crude oil prices should spill over to the consumer level in U.S. gasoline prices, though lingering refinery issues are limiting the relief, analysts said.
Automotive club AAA reports a national average retail price of $2.88 for a gallon of regular unleaded on Tuesday, down just a fraction of a percent from this time last week. That comes as crude oil prices, the largest factor behind the price at the pump, declined some 6 percent over the same period.
“After oil’s selloff in the last week we’ve hit a short-term peak in average gas prices,” Patrick DeHaan, the senior petroleum analyst at GasBuddy, told Zenger News from Chicago.
Because of higher state taxes, California typically has the highest price for gasoline in the continental United States. Despite the slump in crude oil prices, drivers there saw the price at the pump increase by about a half percent from last week to $3.88 per gallon.
Due to the dense network of refineries along the U.S. Gulf Coast, Mississippi usually has the lowest price in the nation. At $2.61 per gallon, the average price there is 1.1 percent higher than last week.
Matthew Kohlman, an associate editorial director for clean products analysis at S&P Global Platts, said from Houston that refineries are still struggling to return to full service following the extreme winter weather in Texas last month.
“Refineries and pipelines have been working through things and are finally close to the finish,” he said. “But those lingering supply issues, along with healthy demand and the annual switch to more expensive summer grade gasoline has kept gasoline prices more buoyant than crude.”
Refineries in late spring start to make a summer grade of gasoline that’s more expensive to produce because of the extra steps needed to prevent evaporation during warmer months.
That’s compounded because refinery operations are still low. For the week ending March 12, the federal government estimated that refineries were working at about 76 percent of their total design capacity, down from about 82 percent in early February, before the freeze.
Patricia Hemsworth, a senior vice president at Paragon Markets, told Zenger from New York that was among her major concerns for supply.
“I am watching more the refinery run levels and imports, which are expected to be huge this week,” she said.
And while gasoline prices could dip briefly along with crude oil, DeHaan said he expected the price at the pump to increase as Memorial Day approaches. Memorial Day marks the unofficial start of the summer driving season and with vaccinations improving in the United States, demand will be high.
(Edited by Bryan Wilkes and Kristen Butler)