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Page added on February 13, 2014
Why gasoline could spike 10 percent in the near future
Gasoline could jump anywhere from 15 to 40 cents a gallon over the next several months, but it could be one of the cheapest summer driving seasons in several years.
GasBuddy.com predicts that more expensive gasoline is on the horizon, as refiners go into annual maintenance mode for the shift to summer fuels. Regular gas has averaged $3.30 per gallon so far this year, the cheapest opening 45 days since 2010 and 6 cents below last year’s price.
But GasBuddy forecasts the national average will rise by 15 to 40 cents per gallon by Easter Sunday—April 20.
Part of the reason is due to what it describes as an “extensive” refinery turnaround schedule, already underway on the Gulf Coast.
Two major northeast refineries on the Delaware River are also down for maintenance and the Irving refinery in St. John, New Brunswick, a big contributor to East Coast gasoline, is expected to go down for maintenance in late February and most of March, according to GasBuddy.
“2014 is going to bring lower prices on average than 2013 but its complicated,” said Tom Kloza, chief oil analyst with GasBuddy.com.
“I do think it will qualify as a spike, but one thing we’ll see is it won’t have the duration as in previous years, or be as spectacular as in previous years. If we get a spectacular increase in 2014, it will have to be hurricane inspired and come in the second half,” Kloza said.
Other factors include increased exports of gasoline and other refined products and less output from European refineries.
West Texas Intermediate and Brent crude, meanwhile have been moving higher, driven in part by stronger demand from China and reduced Libyan capacity. John Kilduff of Again Capital said WTI is also being pulled higher by strong distillate demand, also driving heating oil prices higher.
“Brent is under more pressure than WTI in the current environment. It should probably touch $110 again before it’s all over here,” Kilduff said. “It should be a precipitous pullback in the time period before the driving season really starts to come into focus, and some of the supply issues start to resolve themselves. It’s sort of a round-robin of output issues.”
Kilduff says based on his forecast for crude prices, he does not expect the jump in gasoline prices to be that high.
Even with that quick spike in retail gasoline prices forecast by GasBuddy, the increase is likely to be below average for the annual winter-to-spring switchover. GasBuddy says the average gain in futures prices has been 57 percent in the last 30 years, which would be $1.40 per gallon, but GasBuddy expects a much smaller rise and a 25 percent rally could put futures at $3.10 per gallon.
Kloza said the export of gasoline is increasing and makes the U.S. supply more vulnerable if there is a hurricane that shuts down refineries. He said the areas impacted by the highest prices last year—like the Upper Midwest and Minnesota—will be well-supplied this summer. But the areas that could be hit with higher pump prices are the Northeast, California, and for a briefer time, the Southeast.
More shipments are going to Asia than has been seen in the past. “What popped up on my radar is we sent it to China, we sent it to Japan and we sent to Korea in November,” Kloza said, adding refined products are typically sent to Latin America. “It’s the first time I saw that much going to Asia.”
The national average price for a gallon of unleaded gasoline was $3.31 at the pump Wednesday, according to AAA.
Gasoline futures, meanwhile, were higher Wednesday after a Department of Energy data report showed a much greater-than-expected drop in fuel stocks. Gasoline stocks were off by 1.9 million barrels, well above the 100,000 expected. Futures were at $2.76 per gallon in afternoon trading, a gain of 0.6 percent.
But WTI crude came off its highs after Energy Information Administration data showed a larger-than-expected build in stockpiles. WTI reached a high of $101.38 per barrel early Wednesday, its highest level since October.
Brent, the international benchmark, was also higher, driven Wednesday by reports that Chinese demand surged 11.9 percent to record levels of 6.63 million barrels per day in January. OPEC also raised its expectations for 2014 demand growth by 50,000 barrels a day—now a gain of 1.1 million barrels to 90.98 million barrels a day.
While the gains in Chinese imports could be short-lived, the report added to positive sentiment.
Gene McGillian, analyst with Tradition Energy, also expects WTI to reverse direction, but not yet.
“I think right now we are headed higher still,” he said, adding the only thing that would derail it is a surprise economic report or action by the Fed. “The market is going to edge higher. I don’t think we have a rally in the making, especially with the maintenance programs starting up, but we could probably tack on with momentum, another $3 to $5 to this latest move.”
He said new speculative longs came into the market at $97 to $100. “There is a perception the economy is continuing to improve, maybe the economy is on a stronger footing,” he said.
The refinery maintenance programs reduce the demand for WTI and that should lead to lower prices, and the release of more crude from the hub in Cushing, Okla., via the new Keystone pipeline should also make more oil available, and weigh on prices.
9 Comments on "Why gasoline could spike 10 percent in the near future"
rollin on Thu, 13th Feb 2014 2:09 pm
Gasoline always increases in price in the warmer weather, due to reduced butane levels (butane being the ignitor for cold weather, lower energy and cheaper) from about 10% to 2%.
There is also another trick in the books. US refiners like to keep up capacity so they import crude, refine it and export the finished products. So the origin of exported finished product is not necessarily internal.
shortonoil on Thu, 13th Feb 2014 2:29 pm
We have refinery maintenance every year about this time, but this year it is going to make prices jump way up? Guess that’s why it is referred to as the Lame Brained Media!
In case no one has noticed (apparently the MSM hasn’t) NG prices have jumped from about $2.20 to $5.00. 25% of the energy that goes into refining petroleum comes from NG. Maybe the shale gas industry can’t operate below production costs forever. Of course, the MSM has to protect its illusion of the miracle of shale, and the recovering global economy.
http://www.thehillsgroup.org/
Davy, Hermann, MO on Thu, 13th Feb 2014 3:49 pm
What will happen MSM when a bear market starts and the global economy takes a correction? Let us be modest and gentle lets say like 2008 contraction. Then take an economy that has been destroyed form the inside out by the corrupt politicians, financial industry, central banks and 1% thieves. Well you get an economy that is terminally ill because there are no procedures or medicine to give hope and optimism. In reality after 2008 the doctor was lying to the patient and he really was terminally ill then. It is just 6 years later that the shit will soon be hitting the fan with no tools at our disposal at the highest levels. MSM thanks for all you have done for us. You all have been such good journalist and followed your traditions of unbiased, un-corrupt, and balanced reporting. You MSM slim balls!
rollin on Thu, 13th Feb 2014 4:09 pm
Davy, in reality the doctor was stealing the patient’s wallet while attempting to cover with bedside manner.
🙂
Northwest Resident on Thu, 13th Feb 2014 4:12 pm
MSM is a tool of the corporate elites. I feel sorry for the journalists and public relations graduates who have been trapped into working for MSM. They started out idealistic, looking back at our rich history of undercover reporting that exposed heinous crimes and changed history. The wanted to learn how to sway (manipulate) public opinion via mass media communications because they thought they could raise awareness for worthwhile issues, they could shape attitudes for the better. In the end, the corporate masters collared them and put them on leashes and forced them to apply their skills in the black magic of corporate propaganda. Those MSM writers had to sell their souls to the devil, or just find a different job — flipping burgers at McD’s for example. They have been bent over and enslaved. I pity them, but more than that, I pity the masses who buy into the lies and the propaganda without second thoughts.
GregT on Thu, 13th Feb 2014 4:56 pm
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
– Upton Sinclair
Those in society that choose to uphold the truth, often find themselves ridiculed by society, and out of work.
“Resistance is futile, you will be assimilated.”
– The Borg
DC on Thu, 13th Feb 2014 6:34 pm
Q/Gasoline could jump anywhere from 15 to 40 cents a gallon over the next several months, but it could be one of the cheapest summer driving seasons in several years.
Not near enough. The empires debt serfs need to see multi-dollar level jumps. Not nickels and dimes. Only an empire totally dedicated to consuming vast volumes of toxic fossil fuels to go no place important, obsesses over nickels and dimes like these amerikans. All while the world keeps on burning. Future generations will curse us all for all times if they could see amazing stupidity,greed, petty self-interest like that on display above.
Northwest Resident on Thu, 13th Feb 2014 7:21 pm
DC — If we just keep going like we are right up to the bitter end, burning up all the accessible energy and destroying the climate along with it, then we will have earned the disgust and condemnations of future generations — if there are any.
Davy, Hermann, MO on Fri, 14th Feb 2014 1:36 pm
@N/R yeap, our judgment will be harsh. “YET” there will be some Davids that fought Goliaths without the happy ending but a recognition of being the prophets who preached change.