Once again gasoline stockpiles are falling to alarmingly low levels ahead of the busiest driving season of the year. And that is the perfect recipe for a massive spike in prices over the next few weeks and months, experts say. The increases will come on top of the 20-cent rise in the cost of a gallon of gas seen over the past 30 days. The outlook is quite worrying considering that almost 60% of Americans are struggling to afford prices at the pump, according to a new poll. Production is way down and several factors are adding extra pressure to the oil market right now, signaling more trouble for U.S. businesses and consumers this summer.
Analysts are warning that U.S. motorists will face a repeat of last summer’s high gasoline prices because fuel stockpiles are heading towards multi-year lows ahead of the peak summer driving season that starts in a couple of months. Retail gasoline prices, now averaging $3.60 a gallon nationwide, hit a record $5.02 a gallon last June as crude oil prices jumped due to dwindling inventories.
In the past month, the cost of a gallon of gas rose on average by 20 cents, with some U.S. counties reporting a 36-cent increase, AAA data shows. At the same time, vehicle travel in the U.S. remains 5.6% higher than last year, which resulted in a drop in gasoline stockpiles for five straight weeks.
In fact, Reuters reports that last week’s 6 million-barrel drawdown was the biggest since September 2021, leaving national gas inventories at 229.6 million barrels, their lowest for this time of the year since 2015, according to weekly government data. “We are in danger of going below 200 million barrels of gasoline storage for the first time in many years,” stressed Robert Yawger, director of energy futures at Mizuho.
On Monday, the U.S. price of oil rose 6 percent, after OPEC announced plans to sharply cut production starting in May. The organization informed that it will slash oil production by more than a million barrels a day starting next month, a move that experts say could seriously impact gas prices in the U.S. To make things even more complicated, in March, U.S. oil production plummeted as a result of the banking crisis and concerns about an economic recession that would reduce fuel demand.
All of these factors are weighing on the outlook for prices this summer. GasBuddy forecasted that the production slowdown would cause oil prices to rise by $6 a barrel. At the pump, this could be translated into another 20-cent rise per gallon next week. On the same note, Peter McNally, an industrial materials and energy expert for Third Bridge, predicts a steeper increase, closer to 30 cents per gallon. They’re right, gas prices could reach $4 a gallon before the end of April.
Given that demand increased slightly from 9.15 to 9.3 million barrels a day, according to new data from the Energy Information Administration, this means that we’re only holding 21 days of supply on our domestic reserves. That’s extremely tight.
Meanwhile, Americans are doing what they can to get by, and that often means cutting back on spending. The latest Monmouth University Poll, released last Thursday, found that a majority (or 58%) say it’s difficult to afford gas right now. Since December, the number of people who have had difficulty paying for gasoline has increased by 10 points, the poll results showed. This supply and demand imbalance is going to hit crisis levels this summer and you shouldn’t be surprised if fuel shortages came back too, turning the outlook from worrying to downright terrifying in a few short months.