PITTSBURGH – To Patrick DeHaan, petroleum industry analyst at GasBuddy.com, the recent hike in summer gasoline prices to their highest level in seven years isn’t unusual.
And it may not be over.
“It’s supply and demand,” said DeHaan, noting that petroleum suppliers sharply reduced production during the pandemic as stay-at-home orders kept millions of drivers off the road starting in March 2020. Now, as pandemic restrictions are easing during the summer vacation season, many Americans are rushing to squeeze in a long-awaited vacation before schools reopen.
“Demand has rebounded significantly,” DeHaan said. “Production has not.”
As a result, prices have spiked. According to AAA, the retail price of gasoline has risen about 40% nationally since the beginning of the year, from about $2.40 a gallon in January to about $3.13 a gallon this week. In Western Pennsylvania, the average was about $3.24 a gallon last week and has held steady the past few weeks.
The extremes: the average price in California is $4.31 gallon; Mississippi $2.75.
DeHaan said he expects prices to keep rising slightly for the next few weeks. Tim Redshaw, chairman of the motor fuels and convenience store committee for the Pennsylvania Petroleum Association, agreed, but AAA estimates it could go up another 10 or 20 cents before prices reach their peak.
“I think this will come to a head in the next few weeks when the strong economy and the strongest demand come together before school starts,” DeHaan said. “I think that’s when vacations will peak, and prices will reach their highest level.”
That’s typical at the end of summer, but DeHaan said he doesn’t expect demand to go down as much as normal to reduce prices once school begins. That’s because many students who didn’t have in-person classes last school year will return in the fall, keeping demand higher than last year.
“I think it’s gong to level off, and it’s not going to come down as much as Americans want,” he said.
Redshaw is more optimistic. He thinks production will be adjusted to meet the level of demand in the fall, stabilizing prices.
“My best guess is [the price] is going to be where it’s at now, give or take 5 cents,” he said. “I would say the volumes are still down, but they are catching up.”
The volatility of the market was on display this week when crude oil prices jumped to a seven-year high of nearly $77 a barrel Monday when oil-producing countries were unable to reach agreement on a production level for August. But the next day, that price dropped to under $72 a barrel.
As for the suggestion that oil companies have boosted prices to make up for money lost during the pandemic, DeHaan said that is unrealistic and ignores the free market economy in the U.S.
“Oil companies don’t get to control prices. Americans do [through their use],” he said. “It’s a free market system. They sell at any price.”
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