New taxes, higher oil prices hurt U.S. drivers

AAA reports gasoline prices may dip somewhat, but move even higher once summer approaches.

Daniel J. Graeber
Gas prices start 2017 at their highest in years because of higher fuel taxes and even higher oil prices. File Photo by hxdbzxy/Shutterstock
Gas prices start 2017 at their highest in years because of higher fuel taxes and even higher oil prices. File Photo by hxdbzxy/Shutterstock

WASHINGTON, Jan. 3 (UPI) -- U.S. drivers started 2017 paying the most for gasoline in three years because of higher fuel taxes and increased oil prices, motor club AAA reported.

AAA reports a national average retail price for a gallon of regular unleaded gasoline at $2.35 for Tuesday, up 6 cents, or 2.7 percent, from one week ago. According to AAA, the retail price for gasoline has increased 35 of the last 36 days, in large part because of the sustained rally in crude oil prices.


Oil prices are moving closer to $60 per barrel, compared with a price for Brent crude oil of $36.28 per barrel one year ago. A agreement reached in November by members of the Organization of Petroleum Exporting Countries to limit output starting in 2017 helped push oil prices up nearly $10 per barrel, though no physical managed declines have yet to be implemented.

"Moving into 2017, retail prices will continue to hinge on the ability of cartel countries to successfully implement production cuts, but retail averages are likely to increase leading up to the summer driving season as seasonal refinery maintenance gets underway this spring," the motor club said in its weekly retail market report.

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By region, the West Coast remains the most expensive market in the country, but just barely because of new taxes on retail gas prices that went into effect at the start of the year. California has the highest retail price for gas in the Lower 48 at $2.76 per gallon, and while AAA reports gasoline production is high, that could start to reverse because of planned maintenance at one of the region's largest refineries.

In the Great Lakes states, gasoline inventory levels declined sharply – by nearly 1 million barrels per day – because of chronic refinery issues in the region. As a result, three of the most expensive states for gasoline are in the region, which is also the most volatile in the country. Drivers in Michigan saw their retail prices spike because of a new 7.3 cent gas tax, pushing the price at the pump up about 6 percent from last week to 2.53 per gallon. Ohio, meanwhile, was the only state in the country to post a decline in gas prices from last week.

In the short-term, AAA reported that gasoline demand typically declines in January and that could bring some relief to the pump. That may be offset, however, should all parties to the November OPEC agreement adhere to its terms.

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