Prices at the gas pump are rising yet again as refiners turn to producing jet fuel and diesel instead of gasoline, and as demand jumps ahead of the summer driving season.
Prices across the country were already high before the most recent jumps. Russia’s invasion of Ukraine hit oil markets and global gas prices hard, driving up the price at the pump as governments turned away energy supplies from Moscow.
But prices are now going higher, and averaged $4.48 per gallon on Monday.
That’s up about 40 cents from a month ago, when prices stood at $4.08. Much of the most recent jump has come just in the past few days as prices rose 16 cents per gallon between May 9 and May 16.
Much as high gas prices colored the elections of 2008, when GOP vice presidential nominee Sarah Palin railed on Democratic energy policies, today’s prices are roiling this year’s political debate. Republicans are faulting President Biden’s policies, while Democrats are targeting companies for alleged price gouging.
Experts say the latest jump is linked to a variety of factors including fewer oil refiners making crude oil into gasoline.
Prices of both diesel and jet fuel, which are also made at refineries, are spiking, and experts say many refiners are turning toward making those more profitable products.
“With the market currently really tight both in diesel and jet fuel, we’re actually seeing refineries choose to make less gasoline in favor of those more profitable molecules,” said Matt Kimmel, a senior research analyst for refining and oil markets at Wood Mackenzie.
Patrick De Haan, head of petroleum analysis at gas price app GasBuddy, said that even prior to the latest setbacks, recent refinery closures diminished the country’s ability to produce gasoline.
In 2019, a refinery in Philadelphia caught fire; in 2020 a Canadian refinery closed because of COVID-19, and it has since been announced that it will convert into a biofuels operation; and last year, a refinery in Louisiana closed after flooding related to Hurricane Ida.
“The U.S. has now a million barrels a day less of refining capacity than we did in 2019 at a time when we need every barrel of capacity,” De Haan said.
Analysts said that these supply issues are combining with higher demand to pinch drivers.
“Typically … refineries are making more gasoline ahead of the summer driving season,” said Suzanne Danforth, Wood Mackenzie’s research director for downstream oil and natural gas liquids in the Americas market.
“That’s usually the peak of the gasoline demand in the U.S. with folks going on the road, but because of that diesel price being so high … we’re seeing sort of this counter-seasonal trend,” Danforth added.
Tom Kloza, global head of energy analysis at the Oil Price Information Service, said gasoline trading also was playing a role.
“In the last couple of days they’ve been buying gasoline futures and selling diesel futures, betting that gasoline’s coming into season and it’s going to need to fetch a price above diesel,” he said.
Futures contracts are agreements to buy or sell a particular amount of the product on a certain date in the future. Kloza described them as the “prime mover” of prices.
The high prices come as the Biden administration and the Federal Reserve struggle with inflation generally. President Biden recently described handling inflation as his top issue.
Democrats are worried the rising prices on everything will make it harder for the party to hold on to its House and Senate majorities. The party holds slim leads in both chambers, and the president’s party typically loses seats in the first midterm election regardless of the economy.
House Democrats are trying to put the focus on price gouging. This week, the House is expected to vote on legislation that in an energy emergency would make it illegal to sell fuel at a price that is “unconscionably excessive” and “exploiting” the situation.
The legislation would empower the Federal Trade Commission to take legal action against companies that sell at such “excessive” prices.
The legislation should pass the Democratic House but is unlikely to go anywhere in the Senate, where Democrats would need 10 GOP votes to clear procedural hurdles.
Kloza said that he is skeptical of Democratic claims of price gouging, calling it “posturing.”
“It’s all the people in the market — I mean thousands and thousands of people — that bid the price up. It’s not that ExxonMobil says ‘I’m going to sell my diesel for $200 a barrel,’” he said.
But the Democrats who support the bill are pointing to immense company profits and recently announced shareholder buybacks.
“If oil companies were merely passing costs onto consumers, we wouldn’t expect to see profits jump so significantly,” said a spokesperson for Rep. Katie Porter (D-Calif.), a sponsor of the bill. “These companies are continuing to raise prices despite their record profits, squeezing families in the process.”
A spokesperson for fellow sponsor Rep. Kim Schrier (D-Wash.) also noted that “not every state has a price gouging law, so this will also ensure all Americans can be protected from price gouging.”