There could be $4 gas again

First, the bad news: Gas prices have risen in many parts of the US. They could soon reach a national average price of $4 per gallon for only the second time in two weeks.

The good news is that prices may not stay at their current levels for long as they are already falling in those areas of the country where they are highest.

Monday’s national average price for regular gasoline was $3.92. This is an increase of 12 cents over the previous week and 24 cents from the 98-day price drop that ended last month. This spike was partly due to OPEC+’s decision last week to reduce production by 2,000,000 barrels per day to help lift prices.

The US is a country where high prices are mainly due to reduced refining capacity. Many West Coast refineries were shut down due to maintenance or accidents. Tom Kloza, the global head of energy analysis at OPIS (which tracks gas prices for AAA), said that nearly 18% of the country’s refining capacities were offline when the OPEC cut was made.

These refineries are now starting to come online again, and gas prices in the Western States are already falling.

AAA reported that prices in California, which account for almost 10% of the nation’s gasoline consumption, fell 5 cents over the past week. However, the state still has the highest average price in the country at $6.33 per gallon. The prices in Oregon are now down 10 cents to $5.53 per gallon, the third-highest price behind Alaska and California.

Andy Lipow, an industry analyst, stated that while prices in the East Rockies have been increasing, west Rockies prices are falling as the refinery outages have ended.

Lipow believes the national average is nearing a peak in the short term. He expects that the average will reach $3.95 to $4 per gallon by the end of this week, before falling again. According to Lipow, prices east of the Rockies will likely follow the western price trend and begin to decline next week. The national average could drop to $3.80 per gallon by Halloween.

About 25% of 130,000 gas stations in the country are currently selling regular gasoline for $4 or more. This is up from 15% last month when prices dropped. A total of 13 states — Alaska and Arizona, California, Hawaii Idaho, Indiana, Michigan Montana, Nevada

Utah, Oregon, and Washington — currently have an average statewide price above $4 per gallon.

Lipow stated that the OPEC+ reduction is already reflected in current oil prices. Therefore, traders will “look ahead to demand” going forward.

Rising fears of a global recession will likely impact demand, in the United States as well as around the world. Receding recessions are known to reduce demand because fewer people can commute and as a result, consumers have to cut back on their spending.

Gas is something consumers buy in the same amount regardless of the price, often out of necessity. It is what economists call an “inelastic good”.

Lipow stated that consumers have cut back on driving after the US average cost of gasoline hit $5.02 in June.

Lipow stated that this winter’s heating bills will be even higher than last year and could cause further cutbacks.

He points out that homeowners don’t always see the dollar and cents when they set their thermostats. “But at the gas pump, you see the price and can decide to reduce what you spend.”

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