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Gas Prices Lurch Forward on Concerns about Venezuela and Falling Oil Supply

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Gasoline prices in the United States got another boost in the last week, rising in an overwhelming majority of states, with the national average increasing four cents to $2.31 per gallon, the highest level since mid-June as oil prices close in on $50 per barrel.

“The upward climb at pumps across the country has largely continued as crude oil prices rallied and stand within striking distance of $50 per barrel,” said Patrick DeHaan, senior petroleum analyst for GasBuddy. “The rise in oil has come due to unrest and concern over the political outlook in Venezuela, a major supplier of crude oil to the U.S., due as well to Saudi Arabia’s export cut to six million barrels per day. Add on top of it U.S. oil inventories that have declined over 50 million barrels from March and you have a recipe for a continued rally in gasoline prices in much of the country. Watch for some volatility in oil and gasoline prices in the weeks ahead, especially with what’s going on in Venezuela. August will likely feature the summer’s highest gasoline prices.”

Data from the Energy Information Administration (EIA) showed a large drop in crude oil inventories of 7.2 million barrels, taking them to the second lowest weekly level this year, their lowest since the first week of January. Oil inventories have fallen to over 50 million barrels since March alone, likely as OPEC production cuts and high demand have eaten away at ample inventories. Gasoline inventories also declined 1 million barrels to 230 million barrels or 5% below last year’s level. The drop in petroleum inventories was larger than analysts expected and prices reacted by climbing to nearly $50 per barrel, an 8% rise on the week, which will likely mean gasoline prices will continue to rise across the country.

States with the largest weekly increase in average gasoline prices versus a week ago: Ohio (+11 cents), Michigan (+10 cents), Indiana (+9 cents), Florida (+8 cents), Illinois (+8 cents), Kentucky (+8 cents), Maine (+5 cents), West Virginia (+5 cents), New Hampshire (+4 cents) and Massachusetts (+4 cents).

The states with the cheapest average gasoline prices are: South Carolina ($2.02), Alabama ($2.03), Mississippi ($2.03), Arkansas ($2.06), Oklahoma ($2.06), Missouri ($2.06), Tennessee ($2.07), Virginia ($2.10), Louisiana ($2.11) and Texas ($2.11).

Oil prices opened Monday with West Texas Intermediate crude oil falling 26 to $49.45 per barrel at press time. Last week’s decision by Saudi Arabia to cut oil production was a factor in the weekly rise, as was the ongoing political turmoil in Venezuela, which will be closely watched moving forward as President Trump’s Administration threatens sanctions against Venezuela, should Venezuela President Maduro win elections to expand his power to rewrite the constitution and install more of his supporters into power. Meanwhile, the number of oil rigs in the United States increased by 2 to 766 according to Baker Hughes. The number of rigs now stands more than double where it was a year ago (374).

Back at the pumps across the United States, motorists will likely see the bulk of gas prices moving higher again, with the exception being in the Great Lakes where prices spiked last week and should drift lower before the threat of another major rise towards the weekend, contingent on where oil prices move.

Head of Petroleum Analysis (USA)

Patrick has developed into the leading source for reliable and accurate information on gas price hikes. Patrick has been interviewed as a gasoline price expert hundreds of times since 2004. Based in Chicago, Patrick brings to GasBuddy all his assets to help consumers by giving reliable and accurate price forecasts, including the San Jose Mercury News dubbing Patrick "one of the nation's most accurate forecasters" in 2012.

Oil At A Crossroads
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