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Oil prices, consumer demand push U.S. gas prices higher

The price at the pump is a good 10% higher than this time last month.

Healthy consumer demand could push the price at the pump close to the $4 mark nationally, avoiding the record levels from last year. File Photo by Bill Greenblatt/UPI
1 of 3 | Healthy consumer demand could push the price at the pump close to the $4 mark nationally, avoiding the record levels from last year. File Photo by Bill Greenblatt/UPI | License Photo

Jan. 23 (UPI) -- Healthy consumer demand in the U.S. economy, coupled with a rise in the price of crude oil, has led to yet another week for an increase in the price at the pump, data from AAA showed Monday.

The travel club put the national average retail price at $3.42 for a gallon of regular unleaded on Monday, about 4% higher than week-ago levels and 10% higher than this time last month.

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Unlike last week, when the sole distinction went to Texas, there are no states posting an average price below the $3 mark.

AAA attributed the increase in prices to resilient demand in a U.S. economy still struggling with elevated consumer prices.

"Despite the messy West Coast weather, a mild winter elsewhere in the nation may have led to more drivers getting behind the wheel," it noted on Friday.

That could change this week, however, as a major winter weather system makes its way across the U.S. south. The National Weather Service put much of Missouri, for example, under a winter storm watch through Wednesday morning, with as much as 6 inches of snow forecast for parts of the region.

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But it's crude oil prices that account for the bulk of what consumers see at the pump and those prices are reacting to global, rather than domestic, events. While the price for Brent crude oil, the global benchmark for the price of oil, is up only around 3% since the start of January, it's trading close to $90 per barrel -- a price point not seen since late November.

Much of the surge in the price of oil is because China, the world's second-largest economy behind the United States, lifted tight social restrictions that were in place for much of the pandemic, incentivizing demand.

At home, meanwhile, the nation's refineries are preparing for a regular period of maintenance, which could limit gasoline production over the next few weeks. Refineries in March, meanwhile, start to make a summer blend of gasoline that's more expensive to make because of the additional processing steps needed to keep it from evaporating in warmer months.

The price at the pump could easily hit $4 per gallon later this year but likely won't reach $5 per gallon like it did in June 2022. The federal government put last year's average price at $3.97 per gallon and forecasts $3.32 for 2023.

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