The short days and winter weather of January are making people drive less, lowering gasoline demand. But the price of crude oil has climbed higher as fears of a global recession ease. This is putting upward pressure on pump prices. For the week, the national average for regular unleaded rises six cents to $3.27. The Oregon average slips a penny to $3.69.
“Demand for gas is usually lackluster this time of year and typically starts to tick up as the days get longer and spring break gets closer. So the main driver of higher pump prices this time of year is the higher cost of crude oil, which accounts for more than half of what we pay at the pumps,” says Marie Dodds, public affairs director for AAA Oregon/Idaho.
Crude oil is trading around $80 per barrel. This month, West Texas Intermediate has ranged between about $73 and $81 per barrel and was $84 a year ago. Crude reached a recent high of $122.11 per barrel on June 8. The all-time high for WTI crude oil is $147.27 in July 2008.
Crude oil prices tend to rise in response to positive economic news as countries with growing economies tend to consume more oil than countries with shrinking economies.
Crude prices rose dramatically leading up to and in the first few months of Russia’s invasion of Ukraine. Russia is one of the world’s top oil producers and its involvement in a war causes market volatility, and sanctions imposed on Russia by the U.S. and other western nations resulted in tighter global oil supplies. Oil supplies were already tight around the world as demand for oil increased as pandemic restrictions eased.
Crude oil is the main ingredient in gasoline and diesel, so pump prices are impacted by crude prices on the global markets. On average, about 56% of what we pay for in a gallon of gasoline is for the price of crude oil, 20% is refining, 11% distribution and marketing, and 14% are taxes, according to the U.S. Energy Information Administration.
Demand for gasoline in the U.S. tumbled after Christmas and has remained pretty steady the past couple weeks, rising slightly from 7.51 million b/d to 7.56 b/d for the week ending January 6. This compares to 7.91 million b/d a year ago. Total domestic gasoline stocks rose from 222.7 million bbl to 226.8 million bbl. Flat gasoline demand and increased supply are contributing to limited pump price increases.
The West Coast region continues to have the most expensive pump prices in the nation with six of the seven states in the top 10. This is typical for the West Coast as this region tends to consistently have fairly tight supplies, consuming about as much gasoline as is produced. In addition, this region is located relatively far from parts of the country where oil drilling, production and refining occurs, so transportation costs are higher. And environmental programs in this region add to the cost of production, storage and distribution.
For the week, the national average for diesel loses four cents to $4.60 a gallon. The record high is $5.816 set on June 19. The Oregon average falls four cents to $4.73. The record high is $6.47 set on July 3. A year ago the national average for diesel was $3.62 and the Oregon average was $4.05.