Summer gas prices set to be highest in four years
Geopolitical trends are driving summer pump prices, which typically go up around this time every year anyway, even higher.
Why it matters: It’ll cost you more on your summer road trips and could blunt the economic gains from the recently passed tax overhaul bill.
By the numbers:
- The national average is currently around $2.80 a gallon, up from $2.40 this time last year, according to the U.S. Energy Information Administration.
- Nearly half of all gasoline stations are selling gas at $2.76 a gallon or more, and 17% are $3.01 or more, according to AAA.
- Expect more regions to breach the $3 mark in the coming months, according to AAA spokeswoman Jeanette Casselano. At that price point, 40% of drivers will start changing their driving habits, per an AAA survey.
What’s driving the increase since January:
- A decrease in the global supply of oil, led by ongoing cuts by OPEC, is driving up global oil prices. Oil prices are the major factor in domestic gasoline prices.
- The OPEC cuts are working as the oil cartel intended: to drive up oil prices from lows of around $30 a barrel in January 2016 to more than $65 today, according to Kevin Book, managing director of ClearView Energy Partners, an independent research firm.
- "The collapse of the Venezuelan production is helping them work, perhaps better than anyone expected," Book said.
- Environmental regulations require refineries to switch to a cleaner, more expensive type of gasoline every summer compared to winter.
- Increased demand overall for gasoline and oil, driven by an improving global economy.
What's next: AAA expects the national average hitting $2.90, possibly by Memorial Day. "Then it will likely stabilize during the summer, with the understanding that if demand spikes, prices are likely to follow," Casselano said.