Hurricane season could send gas prices soaring again

(The Hill) – The average price of gas is approaching $4 a gallon nationally, part of a nearly 60-day decline from an unprecedented spike earlier this year.

However, experts say Mother Nature could send prices back up quickly as the Gulf Coast hurricane season ramps up.

As of Wednesday, the national average for a gallon of gas was $4,163, the latest in a 50-day decline, according to data from AAA. Many states, especially in the US Southeast, are already below $4, with the lowest average price – $3,667 – in Texas.

The decline follows a period earlier this year when average prices reached an all-time high of $5 in June, according to data compiled by GasBuddy. A number of atypical factors, from Russia’s invasion of Ukraine to pent-up demand when pandemic restrictions ended, contributed to the price surge. The factors that push it back down can be hard to predict as well.

Patrick De Haan, head of crude oil analysis for GasBuddy, said much of the recent decline appears to be related to fears of an economic downturn. “Market oil prices reflect the rising risk that if we see a recession, it will reduce oil consumption,” De Haan said.

However, he added, “not only that, we’ve seen some increases in gasoline inventories over the last six weeks. And that may have contributed to some of the declines as well.

Devin Gladden, AAA National manager of federal affairs, said that aside from some spikes over the holidays, the US gas market is “roughly in line” with where it was before the pandemic caused demand to collapse in early 2020.

Gladden described the downward trend as “a strange case where it’s trending a little bit like when we’re seeing severe COVID precautions, and those factors are causing prices to keep going down.”

Meanwhile, he added, the concern about the recession is “having an impact on oil prices, in particular, because there is concern that if economic growth stalls or we enter a recession … that has the potential to affect global oil demand.”

“That’s why the market is concerned, because when demand drops, prices usually follow, and so they hedge against potentially lower prices,” he added.

President Biden, who has seen gas prices drag on his approval rating, took a victory lap on Wednesday, Tweet“More than half of all gas stations across the United States now offer gas for less than $4 a gallon.”

The administration has often emphasized the role played by Ukraine’s offensive in the price hike, calling it “Putin’s price gouging,” as well as blaming the oil industry for the amount of unused leases it currently owns on federal land.

However, De Haan said several factors could lead to a rebound in prices.

“The basic question is, is Mother Nature going to get a Category 4 or 5 hurricane into the Gulf of Mexico?” De Haan said. Gulf hurricanes have “time and time again” taken platforms and refineries out of commission for four to six weeks, he said.

Gladden was more sanguine on the dangers of hurricane season, saying the industry “hopes for the best in hurricane season, but obviously we’re prepared.”

However, he added, “the thing to remember is that just the threat of a hurricane can cause the shutdown of crude oil production, especially on the Gulf Coast. And even just shutdowns or preventive measures can also limit supply and cause prices to rise.

Another factor that could cause prices to rise again, De Haan said, is the lack of action from OPEC to increase supply.

Earlier on Wednesday, OPEC announced it would only increase production, with 100,000 more barrels a day. The announcement came shortly after Biden met with Saudi Crown Prince Mohamed bin Salman and proposed the kingdom’s help in stabilizing the global oil market.

There is also the possibility that fears of a recession do not materialize.

“If we don’t see an economic slowdown and we see better economic news, we could see oil prices rise again,” De Haan said. Meanwhile, he added, the supply of diesel can also take a hit moving into autumn and winter as demand spikes.

“As agricultural consumption rises and people start filling up their heating oil tanks, then diesel could see pretty apocalyptic numbers later this year if things don’t go well,” he said.

However, at the same time, the downward trend is likely to remain on the gas side of the equation, De Haan said.

“Gasoline could see lower prices into the fall if we can avoid things like hurricanes or unexpected disruptions with refineries and things like that.”

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