Winter frost drives gasoline prices up – with higher costs to come

An explosion in the Arctic from Texas to Maine is pushing up gas and home heating prices – and experts say they are likely to continue to rise in the coming months.

A deadly winter storm hit the heart of the country, leaving millions of people without power as record high temperatures resulted in increased demand that power grids could not keep up with. In Minnesota, thermometers have dropped to minus 38, the National Weather Service said.

The national average price of gasoline jumped to $ 2.53 per gallon on Tuesday unleaded regular Tuesday, up nearly 15 cents from the average last month, according to the fuel price tracker website GasBuddy.

Prices for natural gas and propane have skyrocketed to 200 percent for utilities as supplies tightened, a spike that could eventually find its way to customers in the form of higher prices. price of domestic heating.

Abnormal below-freezing temperatures have forced the closure of a number of key refineries in Texas, the largest crude-producing state in the United States, cutting supply – as has demand reduced by the coronavirus pandemic began to straighten up to drive and fly after the vaccine rolled out. .

The production and supply disruptions are “like a hurricane,” oil analyst Andy Lipow told NBC News by phone.

“The cold weather resulted in a loss of crude oil production of about 1 million barrels, and also lost about 50 percent of natural gas production due to freezing temperatures,” Lipow said.

Drivers had better get used to calculating a new gas budget, because even after global warming and production resumes, higher prices are expected to stay here, Lipow said.

“Think of it as a new threshold for price increases,” Lipow said. “Once people get vaccinated, they’ll take the roads and planes.”

President Joe Biden’s $ 1.9 trillion stimulus package, if passed, is also expected to generate new demand, Lipow said.

Prices could start to rise even further before the weekend, experts said.

“The outbreak can start later this week and last 7 to 12 days before it is ‘billed’ depending on what motorists pay,” said Patrick De Haan, head of oil analysis for GasBuddy, in an email. “Extreme cold can increase prices by 7 to 15 cents a gallon.”

National average gasoline prices had risen steadily from their April lockdown low of $ 1.74 per gallon, falling between $ 2.10 and $ 2.20 from summer to winter. Since December, they have been rising steadily following cuts by the oil group OPEC + in anticipation of weaker demand in the spring.

“The price of crude oil is the primary determinant of gas prices. They have been increasing for weeks and despite weak demand, prices at the pump are increasing, ”said Jeanette Casselano McGee, spokesperson for AAA, the automotive services group.

“The market is very bullish on vaccinations and what that might mean for return travel, which translates into an increase in crude,” which accounts for over 50% of the price at the pump, said McGee.

Benchmark crude oil prices for the WTI closed just above $ 60 on Monday, the highest since January 2020.

Total national crude inventories fell from 6.6 million barrels of oil to 469 million, according to the latest report from the Energy Information Administration, while refinery utilization increased slightly.

More than 40 states are already seeing higher gas prices than last year, with half recording double-digit increases.

“Crude, not demand, has been the main factor behind the increases in gasoline prices this year,” McGee said.

Supplies are expected to improve in the spring after OPEC + growers have indicated they will likely increase supply after prices recover, Lipow said – although growers are still keeping a close eye on the pandemic.