Gas prices are coming back at full strength.
When the pandemic hit last year, Americans crouched at home, demand for gasoline plummeted and prices fell. Last April, the national average for all categories fell below $ 2 a gallon for the first time in more than four years, according to government data.
But be aware – because fuel prices are expected to peak sharply in the coming weeks, followed by further increases until the summer.
Here are six reasons why gas prices are rising, in addition to predictions of how high they are likely to go – so you can start thinking of ways to save money to help pay for your most expensive supplies.
1. Crude oil prices are rising
As with gasoline, the price of crude oil plunged last spring, with COVID-19 destroying economies and preventing people from traveling. To sustain oil prices, the OPEC cartel and its allies reduced oil production.
But lately, the cost of oil has been rising steadily – because OPEC has been slow to increase production again. Oil in mid-February hit $ 60 a barrel for the first time in more than a year.
“Oil, not demand, was the main factor that drove increases in gas prices this year,” said Jeanette Casselano McGee, AAA spokesman. The average price in most states is now higher than it was a year ago, according to AAA data.
Although gas prices are rising, mortgage rates remain close to historic lows – that is, if you own a home, one way to offset the rising fuel cost is to refinance the loan. You can save thousands of dollars a year.
2. The harsh winter has been difficult for refineries
The brutal winter weather in Texas has seriously affected the state’s oil production, forcing the closure of refineries in America’s leading oil-producing state.
Eleven refineries in Texas have closed at least partially due to extreme winter temperatures, taking up to 20% of the country’s total refining capacity, says the gas tracking website GasBuddy.
“Oil prices have continued to rise as global oil demand recovers from the worst of the COVID-19 pandemic, and now the extreme cold is closing refineries, American drivers simply cannot take a break,” said GasBuddy analyst Patrick De Haan. “We probably won’t see much, if any relief, anytime soon.”
De Haan says pump prices could rise by 10 to 20 cents a gallon in the coming years two weeks. This is a good reason to look for a better car insurance deal, to help reduce your driving costs.
3. The pandemic has also destroyed refineries
Long before the storms, the oil and gas industry was suffering from the drop in fuel sales caused by COVID. At the end of 2020, there were more than a dozen refinery closings that reduced U.S. production by more than 1 billion barrels a day.
“It is possible that some capacity will return to work in the period 2022-2023, but in general, we think these closing announcements will be mostly permanent,” wrote Justin Jenkins, an analyst at Raymond James, of the refinery outages in a report from December.
US oil and gas producers lost tens of thousands of jobs last year, and the redundant workers were struggling to survive.
Many struggling Americans have relied on credit cards more than normal to survive the pandemic. If you are, a lower interest debt consolidation loan can reduce the amount you pay each month – and help you pay the highest prices at the pump.
4. Vaccines should boost travel
As more Americans are vaccinated and life begins to return to something closer to normal, people tend to drive and fly more. And this trend will contribute to the increase in fuel costs.
“On the basis of the rise [in oil prices] is the fact that the coronavirus situation continues to improve, pushing global oil demand upward as production continues to decline, pushing gas prices in the U.S. upward, ”said De Haan of GasBuddy.
You can retaliate by buying lower gas prices, because they can vary by up to $ 1 a gallon in metropolitan areas, according to GasBuddy. In addition, you may want to consider replacing your vehicle with a more efficient model.
In this tax season, you can turn your tax refund into a new set of wheels.
5. Stimulus checks will increase spending – and prices
Congress is working to give Americans another $ 1.9 trillion in COVID relief, including a third round of stimulus checks. Aid is expected to help raise gasoline prices, as consumer spending is shot in the arm.
Goldman Sachs estimated last month that $ 2 trillion in economic stimulus spending over 2021 and 2022 could increase US oil demand by about 200,000 barrels a day. If the supply doesn’t keep up, that higher demand will mean higher fuel prices.
As gasoline becomes more expensive, another way to balance these higher costs is to spend less on other purchases.
You can download a free browser add-on that will point you towards lower prices and other savings whenever you shop online.
6. Summer will bring more expensive gasoline blends
American drivers may end up spending about $ 3 a gallon on gasoline, on average, by Memorial Day, according to AAA and GasBuddy.
These forecasts include switching to more expensive gasoline blends in the summer, with launch scheduled for March. High-level gasoline is used in the summer months to reduce emissions that cause pollution; these mixtures can cost up to 15 cents more per gallon, according to the commercial group of service stations NACS.
GasBuddy says the US could end up being spared $ 3 a gallon this year: “The market could be drenched in cold water, however, if OPEC, which controls a third of global oil production, increases production in the coming weeks or months. “
But looking for ways to save on driving costs is a smart strategy, no matter how much you’re paying for gas. For example, the regular comparison of auto insurance purchases can save up to $ 1,100 a year, studies have found.