Americans can expect a price jump coming to stations as soon as this week
By: Ragina C. Ali, AAA Mid-Atlantic
TOWSON, MD (Monday, September 16, 2019)––On the week, the national gas price average held steady at $2.56, but motorists can expect some volatility at the pump in the coming days and weeks. Over the weekend, Saudi Arabia experienced drone attacks on two major oil facilities – including the world’s largest, Abqaiq. The attacks have taken 5.7 million (crude) barrels per day off the market, accounting for about 6% of the global supply.
Prior to the attacks, global crude oil supply was very healthy, in fact sitting on a global glut of stocks. Regardless, the initial market reaction to the attacks spiked crude oil prices. At the start of the workweek, crude oil (West Texas Intermediate, WTI) is trading for $5/bbl more than on Friday’s closing, up to $61/bbl – a price point for crude not seen since May.
“Americans can expect local pump prices to start to increase this week. The jump could end up being as much as a quarter per gallon throughout this month,” said Ragina C. Ali, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Whether this is a short or long term trend will be determined by the price of crude oil prices and how quickly the facilities in Saudi Arabia can recover and get back online.”
Damage to the facilities is still being assessed, but there is no word if it will be days, weeks or even months before infrastructure is repaired. To ease concerns, President Trump said he has authorized the release of crude from the Strategic Petroleum Reserve. Other Saudi-oil-consuming countries also have emergency reserves to help back-fill the global loss, if needed.
Notably, the U.S. currently depends less on crude imports from Saudi Arabia. The latest Energy Information Administration (EIA) report showed that the U.S. imported the least amount of crude oil from Saudi this decade. In the first half of this year, on average the U.S. imported about 18,000 bbl compared to 35,600 bbl in the first half of 2017.
While U.S. gasoline stock levels have been decreasing the past few weeks, total domestic stocks sit at 228 million bbl, which is ahead of the five-year average for this time of year by several million bbl. Today’s national gas price average is 7 cents cheaper than last month and 28 cents cheaper than this time last year. But these gaps are likely to shrink as the market adjusts to the news and crude oil prices increase.
CURRENT AND PAST GAS PRICE AVERAGES
Regular Unleaded Gasoline
|Monday (9/16/19)||Friday (9/13/19)||Week Ago(9/9/19)||Month Ago(8/16/19)||Year Ago(9/16/18)|
|Washington Suburbs(MD only)||$2.56||$2.55||$2.56||$2.68||$2.91|
|Crude Oil||$61.16 as of11:57 a.m.(9/16/19)||$54.85per barrel(9/13/19)||$56.52per barrel(9/6/19)||$54.87per barrel(8/16/19)||$68.99per barrel(9/14/18)|
Mid-Atlantic and Northeast
The majority of the Mid-Atlantic and Northeast states have gas prices that are cheaper or stable compared to last week. Only four states saw upward movement at the pump this week: Delaware (+9 cents), Maryland (+3 cents), Tennessee (+2 cents) and Pennsylvania (+1 cent). With a three cent decrease, Connecticut ($2.68) saw the largest change in pump prices. At the start of the week, New York ($2.72) has the most expensive average of all states in the region and ranks as the 10thmost expensive in the country.
Gasoline stocks drew down by a significant 1.4 million bbl, dropping levels to 63.6 million bbl. Stocks in the region have mostly been building as of late, though slowly since July. This is the largest draw seen during this timeframe and measures at a 3.1 million bbl deficit compared to this time last year. It is likely more states will see fluctuation in the week ahead, especially as crude oil increases.
Oil market dynamics
At the close of Friday’s formal trading session on the NYMEX, WTI decreased by 24 cents to settle at $54.85, but on Monday, the price was up to $61/bbl.
Overall, oil prices were mixed. Early in the week, oil prices fell after reports emerged that the Trump Administration is considering relaxing sanctions on Iran, which would put more oil into an already oversupplied market. However, the losses were tempered by EIA’s weekly report showing that total domestic crude inventories fell by 6.9 million bbl last week. They now sit at 416.1 million bbl, which is nearly 20 million bbl higher than were they were at this same time last year. For this week, crude prices will see increases due to increased tension in the Middle East – specifically stemming from the attacks in Saudi Arabia – and could be bolstered by increased optimism that China and the U.S., the world’s two largest crude consumers, may be nearing a resolution to the trade war.