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.