(WASHINGTON) Relatively cheap gas prices are boosting driving demand, and 2016 remains poised to be a record year for both gasoline consumption and annual miles traveled. Although pump prices moved higher by two cents per gallon on the week and drivers are paying a dime more per gallon to refuel their vehicles on the month, today’s average price of $2.14 per gallon is the lowest for this calendar date since 2009. Consumers continue to save on the year, with today’s average discounted by 39 cents per gallon compared to this same date last year.
As we enter the summer driving season all eyes will focus on whether refiners can keep pace with the expected increase in demand. Gasoline demand continues to surpass 2015 year-to-date levels, and as more drivers take to the roads, refiners will work to increase gasoline production to levels that meet this higher demand. This likely means another higher-than-normal year of refinery runs, which can put additional strain on refinery equipment and overall operations. In preparation for the busy summer driving season, a number of refineries are reportedly ramping up production and keeping a close eye on their utilization rates. Barring any unforeseen challenges in supply and refinery production, drivers are expected to pay some of the lowest prices for the summer months in more than a decade.
California ($2.77) and Hawaii ($2.58) lead the market and are the only two states with averages above $2.50 per gallon. Gasoline production in the region reportedly fell week-over-week, which may be a contributing factor to prices in the region remaining some of the highest in the nation. Nevada ($2.45), Washington ($2.34) and Pennsylvania ($2.32) join in the rankings as the nation’s top five most expensive markets for retail gasoline. On the other end of the spectrum, consumers in the Gulf Coast states of Texas ($1.90) and Mississippi ($1.91) are paying the nation’s lowest prices at the pump.
Prices have moved higher on the week in the majority of states (44) and Washington, D.C. Drivers in 10 states are paying a nickel or more per gallon week-over-week, with the largest price increases experienced by consumers in Indiana (+9 cents), West Virginia (+9 cents) and Utah (+8 cents). Averages are down in six states over this same period, and motorists in Minnesota (-4 cents), and Hawaii (-3 cents) are saving the most at the pump versus one week ago.
Drivers in the vast majority of states (49) are paying more to refuel their vehicles compared to a month ago. Retail averages are up a nickel or more in 39 states and Washington, D.C. on the month and consumers in 23 states and Washington, D.C. have seen prices jump double digits over this same period. The largest monthly increases in prices have been experienced by drivers in Utah (+32 cents) Indiana (+23 cents) and Ohio (+22 cents). Hawaii is the only state outside of this trend of monthly increases with its average down by fractions of a penny.
Gas prices are discounted in every state and Washington, D.C. by at least a quarter per gallon versus one year ago, largely due to lower crude oil prices and minimal disruptions in supply. The most dramatic yearly savings are seen in the Western states of Alaska (-72 cents), Oregon (-56 cents), California (-55 cents) and Hawaii (-51 cents), which typically lead the market with the nation’s highest averages at the pump.
The global oil market is at a crossroads and it is a mystery as to where oil prices might head going forward. Market fundamentals continue to point to extreme oversupply, though expectations of global demand growth or production cuts by major oil producers could influence crude oil prices higher. Geopolitical factors, such as the recent oil strike in Kuwait helped push crude oil to 2016 highs late last week, also will continue to influence prices in unexpected ways.
According to the U.S. EIA, domestic production declined for yet another week, and the U.S. oil rig count also fell for the fifth consecutive week. However, it is important to note that output is falling at a slow pace and is likely to bounce back to previous levels should prices rebound. As a result of this dynamic, the global oil market is expected to remain well supplied, keeping the price at the pump relatively low compared to previous years.
At the close of Friday’s formal trading session on the NYMEX, WTI settled at a 2016 high and was up 55 cents at $43.73 per barrel.
Motorists can find current gas prices along their route with the free AAA Mobile app for iPhone, iPad and Android. The app can also be used to map a route, find discounts, book a hotel and access AAA roadside assistance. Learn more at AAA.com/mobile.