The price of gas, which has increased rapidly over the past few months, will likely remain high and could go even higher as summer approaches.
One year ago, the average U.S. retail price of gas sat at just $1.94 per gallon, and as of last month, it hovered at about $2.90 per gallon, according to the U.S. Energy Information Administration. That rise is expected to stick around, experts say.
Nick Loris, an economist at the Heritage Foundation who focuses on energy and environmental policy, told the Washington Examiner on Monday that the major factor in the gas-price equation is an increase in demand.
Gas prices plummeted to their lowest level in April of last year because most of the country was locked inside and not traveling due to COVID-19. In the past few months, as the U.S. vaccination rollout continues, people have felt safer leaving their homes, which has increased demand for fuel.
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“More people are getting comfortable with traveling now, airline travel is reaching pre-pandemic levels, more people are comfortable with taking spring and summer vacations, and consequently, that demand is also driving up prices at the pump,” Loris said. “As more economies both in the U.S. and around the world come out of lockdown, that’s going to put even more upward pressure on prices as the demand for fuel continues to rise.”
Another reason why gas prices have been on the rise is because of the season — gasoline blends in the summer are different than those used in the winter, and costs can increase as refineries begin to make the transition. Additionally, summer-blend fuel is more costly to produce than winter-blend fuel.
“The springtime is typically when refiners are doing their maintenance and therefore shutting some of their refineries down as they switch from winter blends to summer blends to comply with air-quality regulations,” Loris explained.
The economist said that while predicting gas prices is “tricky,” he foresees them leveling out and maybe increasing a little bit more over the summer. He said there will be two big determining factors for prices over the summer: if those in the United States continue to be confident in the vaccine rollout and what Europe and the rest of the world look like.
While the U.S. has been on a steady path to reopening, parts of Europe have been grappling with regional outbreaks of COVID-19, as has Canada. The increases have prompted some countries to put further restrictions in place, thus applying downward pressure on oil prices.
“If [Europe] starts to get the COVID restrictions lifted and get COVID under control, that might boost prices as well as some of the demand picks up in Europe,” Loris said.
John Rosen, an adjunct economics professor at the University of New Haven, also said that consumers should not expect to see relief at the pump anytime soon. He thinks the “current dynamic” of higher gas prices will stick around for more than the next six months and probably longer.
“If we’re going into a pretty prosperous 2021 and 2022, which I think we are, then the demand for oil will go up,” Rosen told the Washington Examiner.
Some have pointed out the fact that prices at the pump have gone up since President Joe Biden was sworn into office. While the numbers do correlate, it is worth noting that the average price of gas per month began its most recent ascent late last year before Biden was sworn into office.
Loris said despite Biden not having an impact on the recent increase in prices, there are some decisions the administration has made that could impact the supply and thus the price of oil in the long run.
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“He’s made a decision to prohibit new leases for oil development on federal lands, there is going to be regulations on the industry coming down the pipeline … and while they’re not impacting the price today, when you have policies that restrict the supply in the future, that is going to have a price impact,” he said.