The surge in gas prices is a result of a complex interplay between production challenges due to extreme heat, unplanned refinery outages, supply limitations from international sources, and increased demand
Green-go Trucker 11/08/2023 MATTHEW GOSSETT (Green-go Trucker)
The cost of gasoline has been increasing due to a combination of factors affecting refinery production and elevated demand, resulting in a national average price of $3.82 per gallon for regular gasoline, as reported by AAA. Although prices are still lower than they were a year ago when the national average reached $4.16, the recent surge is notable.
One major contributor to the rising gas prices is the surge in crude oil costs, which constitute nearly half of the final price at the pump. According to Andy Lipow, the President of Lipow Oil Associates, the cost of crude oil has risen by $11 per barrel over the last month, impacting consumers significantly. For instance, the price of crude oil increased from $69.37 on June 26 to approximately $80 on the current date, leading to a 26 cent per gallon increase in gasoline raw material costs.
The extreme heat experienced recently has also played a role in exacerbating the situation. High temperatures have hampered refinery production rates, leading to decreased supplies of gasoline and diesel. Refineries rely on cooling processes during production, but hotter weather makes it challenging to keep equipment running optimally. This issue has affected refineries not only in the United States but also in Southern Europe, Greece, and Italy, reducing the availability of gasoline for export to the U.S.
Unplanned outages at several refineries on the Gulf, East, and West Coasts have further contributed to the limited supply of gasoline. Additionally, some refineries are dependent on local utilities for electricity, and disruptions in power supply can also affect gasoline and diesel production.
The Energy Information Administration (EIA) has reported that demand for gasoline has increased by 3% compared to the previous year, adding to the supply-demand imbalance. Furthermore, actions taken by OPEC+ have resulted in substantial production cuts since October 2022, reducing the availability of oil by over 5 million barrels per day. Additionally, disputes between the Kurds and the Turkish government have led to the removal of 450,000 barrels per day of Kurdish oil from the market since the end of March.
In conclusion, the surge in gas prices is a result of a complex interplay between production challenges due to extreme heat, unplanned refinery outages, supply limitations from international sources, and increased demand. As these factors continue to impact the market, consumers are facing higher gasoline prices, creating concerns for individuals and businesses alike.
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