Natalia Chi
(Joe Raedle/Getty Images via CNN)
(CNN) – Pump gas prices typically dip during the dead of winter as poor weather keeps Americans off the roads. But something unusual is happening this year: Gas prices are soaring.
The national average for regular gas it jumped to $3.51 a gallon Friday, according to AAA. While it’s a far cry from last June’s record high of $5.02 a gallon, gas prices are up 12 cents in the past week and 41 cents in the past month.
All told, the national average is up more than 9% since the end of last year, the biggest year-to-date increase since 2009, according to Bespoke Investment Group.
AAA says some states have seen much larger gains in the past month, including Colorado (98 cents), Georgia (70 cents), Delaware (62 cents), Ohio (60 cents) and Florida (59 cents).
The median price for regular gas in Illinois is $3.69, up 48 cents from a month ago, according to AAA.
The unusual winter gas price hike is attracting the attention of American drivers already grappling with high prices at the supermarket. It also threatens to undermine improvements in the inflation crisis that gripped the economy for much of last year.
So why are gas prices going up?
It’s not because of demand, which remains weak, even for this time of year.
Instead the problem is the offer.
Refinery problems
Extreme weather across much of the United States late last year caused a series of outages at refineries that produce gasoline, jet fuel and diesel that keep the economy buzzing.
For example, Colorado’s only refinery, the Suncor Refinery outside Denver, was shut down by freezing temperatures. When the refinery attempted to restart, it suffered a fire and equipment was damaged.
Suncor has indicated that the refinery — which Lipow Oil Associates says accounts for 17 percent of the Rocky Mountain region’s refining capacity — could be offline for at least weeks.
That helps explain why gas prices in Colorado have shot up nearly $1 a gallon in the past month.
Refineries elsewhere have also been sidelined due to extreme weather conditions. U.S. refineries are operating at just 86% capacity, down from the mid-90% range in early December, according to Bespoke.
Oil prices rebound from lows
Beyond the refinery woes, oil prices have risen, helping to push prices at the pump north.
Since plunging to $71.02 a barrel on Dec. 9, US oil prices have jumped about 16%, to around $82.30 on Friday. That increase was driven in part by expectations of higher global demand as China eases its COVID-19 policies.
At the same time, oil markets no longer receive massive emergency oil injections from the Strategic Petroleum Reserve. The Biden administration has gone from releasing unprecedented amounts of oil from that supply to beginning the replenishment process.
The good news is that some of the refinery’s problems may prove to be temporary, meaning supply should catch up with demand.
The bad news is that some experts warn that gas prices could continue to rise anyway.
GasBuddy warns of $4 Gas by March
Andy Lipow, president of Lipow Oil Associates, expects the national average to hit $3.65 a gallon in the spring.
Patrick De Haan, head of oil analysis at GasBuddy, is concerned typical spring jump in prices will be pulled forward.
“Instead of $4 a gallon happening in May, it could happen as early as March,” De Haan told CNN. “There is more upside risk than downside risk.”
A return of $4 worth of gas would be painful for drivers and could dent consumer confidence. Also, pain at the pump would complicate the inflation picture as the Federal Reserve debates whether to slow its interest rate hike campaign.
The Cleveland Fed’s Inflation Nowcasting model is now targeting a 0.6% month-over-month increase in the consumer price index for January. If true, it would represent a significant acceleration from the 0.1% price decline between November and December.
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