Storm, demand fuel increased pain at pump
The winter storm affecting much of the Gulf Coast region and the rise in crude oil prices have driven the average gasoline pump price in Butler County to about $3 a gallon.
This week's average price for a gallon of unleaded self-serve gasoline in Butler was $2.98, as the Western Pennsylvania average jumped from $2.81 the week of Feb. 15. This time last year, gas was averaging $2.72 a gallon throughout Western Pennsylvania, according to AAA East Central data.
Jim Garrity, AAA East Central's public and legislative affairs manager, said a large factor in the jump is that nearly 40% of U.S. crude oil production is offline because of refinery closures in the Gulf Coast and areas in the Midwest because of the winter storms.
Although much of the gas consumed in Pennsylvania comes from areas more local, such as Philadelphia or Ohio oil refineries, and local production typically has a higher impact on state prices than production in other parts of the country, it's a bit different this time.
“Oil production being shut down in the Gulf Coast is different from oil production being shut down elsewhere in the country, because it does account for about 40% of the crude oil production in the U.S.,” Garrity said.
Crude oil prices are another cause of the gas hike. The West Texas Intermediate (WTI) crude oil commodity is trading at more than $61 per barrel, at one point Tuesday reaching nearly $63 per barrel.“Crude oil accounts for more than 50 cents of every dollar that you spend at the pump, so when you see small changes, you see big effects,” Garrity said. “In this instance, oil is up more than $13 a barrel from the beginning of the year.”The supply-and-demand functions of the oil markets are a big reason why, Garrity explained. In 2020, oil prices dropped as low as negative-$37.63 a barrel, as fewer people were driving.Now, however, drivers are increasing demand. Combined with the decrease in production, prices are driven higher as people are willing to pay more to drive to work and other destinations.Garrity said that because of myriad factors involved in oil and gasoline prices, he couldn't speculate on whether refineries going back online would drive down the price that consumers pay at the pump. He did, however, say it is possible prices would come “down a little bit.” He added price increases in the past few days have been lower than they were last week, another cause for optimism.“It's very possible that we're out of the woods in terms of major increases at the pump,” he said. “At this point, increases may be smaller and, as things return to normal in the Gulf Coast, prices might come down a little bit.”Garrity said price decreases at the pump may be minimal too as companies produce summer-blend gasoline, which is more expensive to produce and consume.Others remain pessimistic for consumers. Goldman Sachs Group Inc. revised its oil price forecast this week as well, projecting WTI crude could reach $72 a barrel by third quarter 2021, the highest it would be since September 2018.Still, neither current prices nor predictions come close to the WTI all-time high of $167.30 per barrel, reached in June 2008.The current price per gallon of $2.95 “is higher than we saw in 2018, but it's still not getting to the point where it's drastically higher, like levels we saw in 2008, 2009,” Garrity said.
