Gasoline Prices Rise As U.S. Refineries Send More Fuel Overseas
The weather is warming and vacation season approaching.
And, just as predictably, the price of gasoline is rising. It does that every spring as refineries switch to more expensive summer blends.
But this year, the seasonal price bump is getting an extra bounce. Gasoline is costing consumers about 5 percent more than last year at this time, even though oil supplies are abundant. Why?
Experts say U.S. retail prices are nudging higher in large part because Gulf Coast refineries are sending more gasoline to other countries.
"We think there's definitely an impact on gasoline prices, especially coming from the exports to Latin America," said John Galante, an analyst with Energy Security Analysis Inc., a consulting firm.
In Mexico, Brazil and other countries to the south, customers are thirsty for U.S. gasoline and diesel fuel, he said. "If there were no pull coming from Latin America, then prices would be really favorable" for U.S. consumers, he said.
The Energy Information Administration says total U.S. petroleum exports, which consist mostly of gasoline and diesel, are running about 25 percent higher, compared with last year.
With so much fuel headed elsewhere, the national average price for a gallon of regular gasoline is now $3.69, compared with $3.53 a month ago, according to report. The average price is about 18 cents a gallon more than it was at this time last year.
This year's inflation is frustrating for independent gas station owners who say their profit margins don't benefit much when retail prices rise. They are paying a higher wholesale price, and getting hit with higher bank fees for customers' use of debit and credit cards.
"The credit card fees are 3 percent, so the higher the gas prices, the higher the fees we pay," said Amy Williams, general manager at in Branson, Mo. She was reached by phone.
"We're breaking even" on gas sales at the family-owned business, she said.
Williams is worried that high gas prices could dent the summer tourist season, which brings customers into the store for beverages, packaged foods and other items.
When fuel is expensive, "we have people who tell us that they have to cut back," she said. "They don't get out on the lake as much because that's more for their boat."
But even if increased gas exports boost prices for U.S. consumers, Gulf Coast refiners can't be blamed for expanding their global customer base, Galante said. "Refiners are making logical decisions, based on profits available to them in different markets," he said.
He notes that earlier this year, TransCanada Corp. opened up the southern portion of the Keystone XL pipeline, which allowed oil to flow more readily from stockpiles in Oklahoma to refineries in the Gulf. That steady supply is spurring refineries to seek out even more customers in other countries.
Other factors might also affect gas prices in coming months. For example, prices could go higher if U.S. demand were to take off amid a strengthening economy. On Friday, the University of Michigan index of consumer confidence showed a 7 percent rise in the gauge of economic expectations this month.
Also, cabin fever could be a factor. Many Americans were stuck in the house during a long, cold winter. Once the weather turns hot, the urge to take a long drive may prove irresistible, further boosting demand for gasoline.
Another potential factor is Russia, an oil-producing giant. If tensions between Russia and Ukraine worsen this summer, it could have an impact on fuel supplies headed from Russia to Europe. And that could boost prices global oil prices.
On the other hand, surging U.S. oil supplies could nudge prices down again in coming weeks. The EIA says in its 2014 Summer Fuels Outlook that it expects Brent crude oil prices to hold this summer at around $104 a barrel, about $2 lower than last summer.
But the EIA also hedges its bets, saying "uncertainty over crude oil price forecasts remains high."
NPRbusiness deskinternTanya Basu contributed to this report.
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