Patrick DeHaan is a senior petroleum analyst at gasbuddy.com
To all motorists: be prepared for higher gasoline prices ... coming soon to a pump near you.
For six weeks, the national average for regular self-serve gasoline has fallen. It all started May 11, when prices peaked at $3.965 per gallon in the United States, according to GasBuddy.com data. Oil prices then slid, resulting in a drop in average gasoline prices—hitting a low of $3.558 per gallon on June 29. However, as the old saying goes, "All good things must come to an end", and this saying appears to hold true for gasoline prices as well.
An announcement last month by the International Energy Agency to release 60 million barrels of crude from worldwide emergency stockpiles was supposed to help ease oil prices, which would have meant continued drops at the pump, but when some oil producing countries caught wind of the announcement, they countered by signaling a cut in output may be needed.
The fact is that oil inventories are just two million barrels from their highest ever July level, according to the U.S. Energy Information Administration. Oil inventories are a staggering 83 million barrels higher than their lowest July level, painting the picture that markets are indeed well supplied.
It shouldn't come as a surprise that some countries are considering cutting supply to counter markets that are virtually awash in crude. Perhaps the bigger surprise here is that emergency inventories were to be released when the market was anything but desperate for crude. Of the two issues--releasing a one-time amount of oil and countries cutting output for an unknown time, the latter is more concerning. [See political cartoons about energy policy.]
Oil prices have risen $6/bbl since their low after the IEA's announcement last month and gasoline prices have begun to slowly shift higher as well. The U.S. national average has climbed 6.4 cents per gallon in the last week and will likely continue to rise as stations respond to higher wholesale costs. To add insult to injury, we're also just weeks away from the peak of hurricane season. With much of nation's refining and oil production in the Gulf of Mexico or in close proximity, the stakes are high.
It is likely that motorists will continue to feel a growing pinch at the pump to conclude the summer months, and a return to last year's average of $2.75 seems next to impossible.