- US gas prices could keep rising after OPEC+ slashed output, but prices could fall in some states.
- That’s because refinery issues in key states get resolved, and winter season dampens gas demand.
- California is likely to see prices drop while the East Coast could see prices rise, Gas Buddy said.
US gas prices are primed to keep climbing after OPEC+ slashed output – but some states could actually see a drop, experts say.
The US fuel market already suffers from maintenance outages at key regional refining hubs, specifically in California, and increasing gas demand, contributing to the rise in US gas prices, according to the American Automobile Association.
The US average for a gallon of gas stands at $3.89 at last check Friday, per AAA.
And while an OPEC+ production cut will limit the amount that prices will drop, with fuel cost tracking company Gas Buddy expecting gas prices below $3 a gallon to disappear as a result, some relief to rising US gas prices will be felt as refinery issues are resolved, it told Insider.
So even as the lowest gas prices rise in some states, they will fall in three regions including West Coast, Great Lakes and Plains, Gas Buddy says.
“We’re going to see many sub-$3/gal #gasprices disappear in the weeks ahead, primarily thanks to OPEC’s decision to cut oil production,” De Haan added.
“The OPEC decision today will basically cause #gasprices only in a few regions to go up for now… East Coast, South, Northeast, Rockies potentially. West Coast, Great Lakes, Plains will see prices drop as refinery issues are addressed,” he continued.
US gas prices have exponentially climbed this year thanks to Russia’s war with Ukraine and Europe’s unrelenting energy crisis. Prices rose as high as $5 a gallon three months ago, mirroring increasing global oil prices.
The steady drop in prices that followed came after the Biden administration began releasing record amounts of crude oil from the Strategic Petroleum Reserve, and fears of a recession dampened demand. But now, gas prices are picking up again.
US refinery issues on the West Coast have crunched the regions’ supply, and subsequently elevated California gas prices to $6.39 a gallon as roughly six refineries undergo maintenance or experienced outages, per the AAA. But weakness in the oil refinery industry is nothing new to the eye, with Goldman Sachs previously highlighting “unprecedented” bottlenecks at oil refineries, where crude oil is converted into gas.
That’s largely in part due to the impact of the coronavirus pandemic, and the inability of refineries to cope with a rebound in demand for gasoline as lockdown restrictions eased.
But while a few areas in the US, namely the West Coast and the Great Lakes regions saw drastic price rises over the last couple of weeks, prices should drop as refinery problems get resolved and they start to come back online again, Gas Buddy told Insider.
“Gasoline markets further cooling off today, California, Great Lakes, Plains wholesale prices will be dropping again today, while PacNW remains very elevated for now,” De Haan said.
Prices in California could also see signs of easing as the state governor Gavin Newsom relaxes rules toallow oil refineries to start to sell more polluting winter-blend gas, according to the AAA. To that effect, some US states could dodge the impact of the OPEC+ production cut.
The OPEC+ measure to reduce production by 2 million barrels per day in a bid to send crude prices higher, ramped up the pressure on US President Joe Biden. The White House accused OPEC+ of “aligning with Russia” as tighter supply should drive crude prices higher and in turn raise gas prices.
The White House is watching gas price moves closely ahead of fiercely contested midterms only a few weeks away on Nov 8. Biden has made them a focus of his administration, and has called on oil companies to cut prices, while also exploring gas export bans and relaxing sanctions on Venezuela so Chevron can pump more oil there.
AAA echoed De Haan’s rationale of falling gas prices in some regions, where it stated that recession fears could impact crude demand meaning prices may not see large increases. It added that the fall and winter driving season means gas demand usually dips, supporting a price drop in weeks ahead.