U.S. gasoline prices began to rise after declining for more than three months, as a result of a confluence of factors, including the impact of Hurricane Ian and production cuts by the Organization of the Petroleum Exporting Countries (OPEC). A gallon of regular gasoline averaged more than $3.83 nationally on Oct. 5.
With gasoline costs rising as winter approaches, as gasoline demand typically declines, the final impact of these variable factors on the average American driver is difficult to determine.
- After falling over the past three months, U.S. gas costs rose once again.
- Refinery maintenance work, unplanned closures due to storm damage and OPEC production cuts could contribute to tighter supply and higher costs at pumps.
- The Biden administration has warned U.S. oil producers against price speculation and has vowed to release millions of barrels from U.S. Strategic Oil Reserves in a bid to keep price increases to a minimum.
- Fuel demand tends to fall in the United States during the winter.
Refinery damage from Hurricane Ian
Hurricane Ian hit the Gulf Coast region in late September, threatening to damage oil refineries and offshore oil projects. Some assessments place hurricane damage at a lower rate relative to other storms. But any unplanned refinery disruptions combined with scheduled maintenance and a host of other factors threaten already weak oil supplies, prompting President Biden to warn oil industry executives not to raise prices unnecessarily.
OPEC production cuts
Previous factors that pushed gasoline prices higher are likely to be exacerbated by OPEC’s decision to cut oil production by 2 million barrels per day starting in November, announced on October 5. Analysts believe the cut is intended to trigger a recovery in crude oil prices, as the cost of a barrel has fallen from about $120 four months ago to $80 in early fall.
The Biden administration blasted OPEC for the decision in a statement the same day as the announcement, saying the Department of Energy would ship an additional 10 million barrels of oil from U.S. Strategic Oil Reserves to the market in November in an effort to reduce potential cost increases for consumers.
The future impact on gasoline prices is unclear
While refinery damage and OPEC production cuts are likely to contribute to rising gasoline prices in the United States, there are other factors that could also cool this growth. Gasoline demand is usually highest in the warmer months, falling in winter as consumers drive less. During the year, the refinery also produces cheaper winter fuel, which keeps costs down. Moreover, the Biden administration may be highly motivated to keep fuel costs low ahead of the November midterm elections.