Back to school. Cooler weather. Higher gas prices? That’s not the way it’s supposed to work.
While September is definitely a time for back to school and the promise of respite from scorching summer temperatures, it’s also a time when gas prices typically go down following the strong demand created by vacation season and more travel during the previous months.
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But a rather ominous prediction from fuel price tracking site GasBuddy sees that traditional trend going in the opposite direction. It is predicting hikes at the pump from 50-cents to as much as $1 a gallon in the coming days.
And while prices at the pump may be frustrating, chances are the company selling it are equally as frustrated.
“When it comes to gas prices, it’s important for people to remember that the retailers have the least amount of control on prices of anyone in the system,” said John Maynes, director of government and regulatory affairs for Fuel Iowa, an organization representing convenience stores and gas haulers.
“Iowa’s average price of gasoline jumped to $3.75 a gallon today (Friday) when it was $3.61 yesterday (Thursday) so a pretty significant jump and probably a shock to some folks at the pump,” said Brian Ortner of AAA.
Why are gas prices going up in Iowa?
There are some things this week that are impacting pricing, Ortner said.
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“One of them is the announcement by OPEC (Organization of the Petroleum Exporting Countries) this week that they are cutting production through the end of the year, that obviously creates some concern,” he said.
Ortner said the price of crude oil, which ultimately gets refined into gasoline, has gone up.
“If we look at the price of crude oil, it’s almost $88 a barrel today (Thursday). Last week and the week before we were at $77, $78, $79. That’s $10 a barrel higher and that’s going to impact those prices,” he said.
Iowa gas prices usually drop in the fall, winter
Fall is also a typical time for refineries to shut down for scheduled maintenance and to shift production to winter blend fuels, Ortner said. Winter blends allow gasoline to ignite more easily to start vehicles in colder weather and are typically less expensive. The maintenance and switch over to winter blends are done this time of year when demand starts to drop following the summer months.
“And while it’s not a long-term situation that the refineries will be out of production, it will have a short-term impact on prices,” said Ortner. “Summer is a high demand for fuel. With school back in session and as we get into fall, demand goes down a little bit so timing wise, it helps to schedule maintenance at the refineries when demand is not as high.”
Hurricanes haven’t taken oil refineries offline — yet
So far, refinery operations along the Gulf of Mexico have not been interrupted by hurricanes, but Ortner said it is a factor to keep an eye on going forward.
“We do have to keep in mind that it is still hurricane season and that could have an impact as well,” said Ortner.
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Maynes said fires at refineries in Galveston, Texas and Garyville, Louisiana also lowered production.
“Add to that, the extreme heat experience around the country also impacts capacity at refineries,” said Maynes.
But will we see as much as a $1 gallon gasoline spike? Ortner said it is too soon to tell and even if it does happen, gas prices are likely to see further downward pressure as we get further into fall.
“It still is a simple equation of supply and demand. As we get into fall and winter months, obviously demand goes down so that would hopefully help prices decrease as well. With OPEC stating what they did for the end of the year that could have impact on prices as we move into the winter months. But hopefully, this current situation where we may see a spike will be short-termed and hopefully we will see the cost of oil go down a little bit,” said Ortner.
By the end of September, gas prices generally decrease as the switchover processes and demand continues to fall, according to the National Association of Convenience Stores.
Traditionally, gasoline prices are lowest during the first week of February, the NACS notes on its website.
So for motorists at the pump, the brighter days may be only about four-and-a-half months away.
Kevin Baskins covers jobs and the economy for the Des Moines Register. Reach him at [email protected].
Source: https://t-tees.com
Category: WHY
