An arctic explosion from Texas to Maine is driving up gas and domestic heating prices – and experts say they are likely to continue to rise for the next few months.
A deadly winter storm it reached the heart of the country, leaving millions of people without power, as the record temperatures generated an increase in demand that the electricity grids were unable to meet. In Minnesota, thermometers dropped to minus 38, the National Weather Service said.
The national average price of gas jumped to $ 2.53 a gallon on Tuesday with no regular lead, almost 15 cents more than last month’s average, according to the GasBuddy fuel price tracking website.
Prices for natural gas and propane soared by up to 200% for utilities as supplies tightened, a peak that could end up hitting customers in the form of higher domestic heating prices.
Abnormal and sub-zero temperatures forced the shutdown of a number of major refineries in Texas, the largest crude oil producing state in the U.S., cutting off supplies – as well as reduced demand for the coronavirus pandemic began to recover to drive and fly after the launch of vaccines.
Production and supply disruptions are “like a hurricane,” oil analyst Andy Lipow told NBC News by phone.
“Cold weather resulted in a loss of crude oil production of around 1 million barrels, and it also lost about 50 percent of natural gas production due to freezing temperatures,” said Lipow.
Drivers had better get used to calculating a new gas budget, because even after the weather warms up and production resumes, higher prices are likely to stay, said Lipow.
“Think of it as a new level of price increases,” said Lipow. “As soon as people are vaccinated, they will go to the roads and planes.”
President Joe Biden’s $ 1.9 trillion stimulus package, if approved, should also generate new demand, said Lipow.
Prices may start to rise further before the weekend, experts say.
“The increase could start at the end of this week and last from 7 to 12 days before being” set “at the amount that drivers are paying,” Patrick De Haan, head of oil analysis at GasBuddy, said in an email. “The extreme cold can raise prices from 7 to 15 cents a gallon.”
Average national gas prices have been rising steadily since the April blocking lows of $ 1.74 per gallon, ranging between $ 2.10 and $ 2.20 from summer to winter. Since December, they have been rising steadily following cuts by the oil-producing group OPEC + in anticipation of weaker demand in the spring.
“The biggest factor that drives gas prices is crude oil prices. They have been rising for weeks and, despite low demand, pump prices are rising, ”said Jeanette Casselano McGee, a spokeswoman for AAA, the automotive services group.
“The market is very optimistic about vaccines and what this could mean for the return of travel, which translates into more crude oil,” which represents more than 50% of the price at the pump, said McGee.
Crude oil reference prices for WTI closed just above $ 60 on Monday, the highest since January 2020.
Total domestic oil inventories fell 6.6 million barrels to 469 million, according to the latest Energy Information Administration report, while refinery use has increased slightly.
More than 40 states are already seeing gas prices higher than last year, with half experiencing double-digit increases.
“Crude oil, not demand, was the main factor driving gas price hikes this year,” said McGee.
Supply is expected to improve in the spring, after OPEC + producers have indicated that they are likely to increase supply after price recovery, Lipow said – although producers are still eyeing the pandemic.
