Cheap gasoline in the winter isn't likely in 2018

Gas prices normally drop off in the winter, but with oil priced at four-year highs, this year is anything but normal.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Jan. 17, 2018 at 6:54 AM
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Jan. 17 (UPI) -- Demand strains and a steady surge higher for oil prices means a typical winter of lower U.S. retail gasoline prices isn't in store this year, analyses show.

Motor club AAA reports a national average retail price of $2.53 for a gallon of regular unleaded gasoline in the United States, up slightly from Tuesday and 10 cents per gallon higher than one month ago. Two years ago, the average retail price for January was $2.05 and that dropped to $1.87 by February.

Crude oil prices opened 2018 with a record-setting streak, with the price for Brent crude oil, the global benchmark, topping $70 per barrel for the first time in four years earlier this week. Higher oil prices means higher gasoline prices and AAA said in its weekly retail market report that demand, meanwhile, was the highest for January in seven years and those factors were adding up.

"If demand continues to climb, motorists are likely to see pump prices increase too, paving the way for even more expensive fill-ups," Jeanette Casselano, a spokesperson for AAA, said in a statement.

Only Alaska and Rhode Island saw their state average price for gasoline decline in the last week.

Patrick DeHaan, a senior analyst for GasBuddy, said gasoline production is "very strong" and that could bring some short-term relief, especially as the nation's refiners make preparations to make a summer-blend of gasoline and sell off their winter blend at a discount. DeHaan added, however, that the window for cheaper gas likely closes sometime in mid February.

The West Coast market is the most expensive in the country, with California topping out at $3.18 per gallon. Gasoline inventories, however, are near two-year highs, though an upcoming period of planned maintenance at area refineries means gas production levels may dip in the coming weeks.

The Great Lakes market is the most volatile, with Indiana seeing a 9 cent per gallon spike over the week. Regional gas prices vary from $2.45 in Ohio to $2.67 per gallon just across the border in Michigan. That comes even as inventory levels build up in the region. Retailers in the region tend to compete heavily in a market that depends on a few refineries, so periods of low prices typically follow big spikes and contribute to volatility.

Crude oil prices, after settling above $70 per barrel on Monday for the first time in four years, are pulling back and could bring some relief for consumers. If U.S. crude oil production forecasts are accurate, it will be a record-setting year and offset some of the voluntary cuts in output from the Organization of Petroleum Exporting Countries.

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