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Gas Prices Increasing Earlier This Year Due to Earlier Summer Blend Switch and Higher Oil Prices

February 21, 2013

Despite predictions of lower gasoline prices later this year, they’re still rising nationwide, with an average price for a gallon of regular unleaded gasoline at $3.75 on Feb. 19, according to AAA’s latest Fuel Gauge Report. The report added that this is the highest price on record for that calendar day.

This price is 15 cents higher than Tuesday of last week, 44 cents more than a month ago, and 19 cents more than the average price on Feb. 19, 2012. The jump of 44 cents is also the largest month-over-month increase since June 2009, AAA stated.

The company said one reason for the jump is due to U.S. refineries performing maintenance and switching to summer blend gasoline earlier in the year, though AAA noted that this shift is the choice of refiners and not due to a change in the deadline to complete the switch to summer blend fuels. Maintenance and the switch mean refineries are offline, which can affect fuel supplies. AAA added that this year higher oil prices are driving up prices as is positive economic news.

Although prices are higher now, AAA expects the peak retail gasoline price to arrive earlier in the year and that the peak price will be lower than the peak price last year.

One possible source of relief for high prices could come from planned changes to an oil distribution hub in Cushing, Oklahoma. According to the U.S. Energy Information Administration's (EIA) This Week in Petroleum report, pipeline capacity to the hub has been delivering an additional 815,000 barrels per day during the last three years. However, during the same period, only an additional 400,000 barrels per day of capacity to take oil from that hub has been added. A project scheduled over the next two years is slated to deliver an additional 1,190,000 barrels per day to Cushing, but there is a planned expansion of take away capacity of 1,150,000 barrels per day. Also, about 830,000 barrels per day of new pipeline capacity is planned that will move oil from the Permian basin (in the Western U.S, including Texas and New Mexico) directly to refineries in the Gulf Coast.

EIA said that if the additional capacity to distribute oil from Cushing (not just to it) is used, along with the planned pipeline capacity to avoid Cushing entirely, this will help reduce the need for oil imports, for example via sea-going tankers. 

Prices in all 50 U.S. states increased since last week. The states with the largest increases include Tennesse, up 22 cents; Arkansas, also up 22 cents; South Carolina, up 21 cents; and Mississippi, also up 21 cents. The top five highest average prices on Feb. 19 were in Hawaii; at $4.27, California, at $4.05; New York, at $3.93; Connecticut, at $3.91; and Alaska, at $3.80. The chart below shows the top 10 states with the highest prices.

Chart courtesy AAA.
Chart courtesy AAA.
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