As Summer Driving Beckons, Gasoline Prices Are All Over the Map

Staff Writer
Columbus CEO

c.2014 New York Times News Service

HOUSTON — With the Memorial Day weekend representing the beginning of the summer driving season, it might be a good time to plan a trip to the Great Lakes or the Rocky Mountains. Gasoline prices in the nation’s midsection should be 10 to 50 cents cheaper per gallon than a year ago.

For comparison shoppers, trips down California’s coast or out to the Hamptons don’t look quite so appealing. Gasoline prices on the coasts will be 10 to 30 cents higher a gallon than last year.

The sharp differences in gasoline prices around the country reflect all the complexities of the global energy markets. Fighting between militias blocking oil exports from Libya, along with persistent unrest in Iraq and Nigeria and uncertainty surrounding Russian oil supplies, are keeping prices high for the types of oil imported on the East Coast. Fitful maintenance at a handful of refineries in California and Washington state are curbing gasoline supplies on the West Coast, pushing up prices.

At the same time, growing imports of cheap Canadian heavy oil are arriving at Midwest refineries, where maintenance has been smoother this year. That is helping to keep Colorado, Minnesota and Iowa drivers satisfied. And Gulf Coast drivers continue to enjoy the benefits of an abundance of oil and gasoline thanks to gushing fields in Texas, Louisiana and Oklahoma.

When experts take all the price divergences into account, they predict a national average at the pump this Memorial Day that will be virtually the same as in 2013.

“We’ll be slightly below last year and slightly below the year before nationally, and it will be the lowest price at the pump since 2011,” said Tom Kloza, chief oil analyst for GasBuddy. But he added that comparisons of national averages were of little use since “it’s really a tale of two countries.”

As of Friday, the national average for a gallon of regular gasoline was $3.66, a fraction of a cent lower than last year. But the range was sizable: In California, motorists paid on average $4.13 a gallon, while in Missouri and Arkansas only $3.40, according to the AAA daily fuel gauge report. The AAA auto club is predicting that the most Americans will travel this holiday weekend since 2005, and that 36.1 million people will travel at least 50 miles, up 1.5 percent from 35.5 million last year.

“As the economy continues to improve at a slow and steady pace, consumer spending, disposable income, consumer confidence and the employment outlook are trending up, which is welcomed news for the travel industry,” said Marshall L. Doney, AAA’s chief operating officer in a commentary distributed by the auto club.

AAA estimated that 85 percent of travelers would travel to the beach or other amusements by car. It also estimated that airfares would be 6 percent higher than a year ago, while midbudget hotel prices would be up 2 to 3 percent and car rental prices up 1 percent.

The biggest component of gasoline prices is oil prices, and most oil benchmarks are 10 percent or more higher than last year.

World supplies and demand have been roughly in balance in recent years, as increasing North American production has taken up the slack for interruptions caused by North African and Middle East tensions. But the supply outlook has weakened since the beginning of the year, when it appeared that nuclear energy talks with the West might loosen oil export sanctions on Iran and hopes brightened that tensions between militias and the weak central government in Libya might ease. Those hopes have been dashed, and Russia’s aggressiveness toward Ukraine has raised the possibility of eventual export sanctions on Russia, which supplies as much oil to world markets as Saudi Arabia.


Gasoline prices have generally been higher in recent months than 2013 also because of complex refinery refitting and maintenance on the West and Gulf Coasts. But with the seasonal change from winter to summer blends virtually over, most energy analysts think gasoline prices have peaked, unless a strong hurricane in August or September causes shutdowns of gulf refineries and pipelines.

On the bright side, few energy experts say they think that a meaningful drop in Russian oil exports is likely. And while 2.5 million barrels a day of OPEC production in Libya, Iraq, Iran and Nigeria are offline, according to a recent Barclays report, Saudi Arabia and a handful of other producers have kept the cartel’s production near its target of 30 million barrels a day. With the Brent oil benchmark price nearly $10 above the OPEC $100-a-barrel preferred price, there is little likelihood the cartel will cut production meaningfully anytime soon.

The Eastern Seaboard has been receiving larger shipments of North Dakota oil by rail over the last year, replacing some more expensive imports. But with pipelines from the Gulf of Mexico refineries full, New York and other coastal states still depend on expensive imports from the North Sea and Africa.

For national drivers, on average, Kloza said, “the future looks really bright.” He added, “If you could guarantee no hurricanes this year, we could see a steady drop in gas prices for the remaining seven months of the year.”

But that is still a big “if.” Much of the country’s refinery capacity lies in a relatively narrow coastline between Corpus Christi, Texas, and Pascagoula, Mississippi. With those refineries having growing export commitments to Mexican and South American customers, a couple of shutdowns could cause gasoline shortages and send prices soaring across the South and the Eastern Seaboard by Labor Day, as it has during some past hurricane seasons.