U.S. gasoline prices have begun to rise after declining for over three months, the result of a confluence of different factors including the impact of Hurricane Ian and production cuts by the Organization of Petroleum Exporting Countries (OPEC). A gallon of regular gasoline averaged just over $3.83 nationwide on Oct. 5.
With the cost of gasoline rising as the winter approaches—a time of year when gasoline demand typically eases—the ultimate impact of these varying factors on the average American driver is difficult to ascertain.
- After falling for the past three months, U.S. gasoline costs are once again on the rise.
- Refinery maintenance work, unplanned shutdowns due to storm damage, and OPEC production cuts could all contribute to a tighter supply and higher costs at the pump.
- The Biden administration has cautioned U.S. oil producers against price-gouging and has promised to release millions of barrels from the U.S. Strategic Petroleum Reserve in an attempt to keep price increases to a minimum.
- Demand for fuel tends to drop in the U.S. during the winter.
Refinery Damage Due to Hurricane Ian
Hurricane Ian struck the Gulf Coast region in late September, threatening to damage oil refineries and offshore oil projects. Some assessments place the damage due to the storm at a lower level relative to other hurricanes. But any unplanned refinery outages combined with scheduled maintenance and a host of other factors threaten an already tenuous oil supply, prompting President Biden to warn oil industry executives not to raise prices unnecessarily.
OPEC Production Cuts
Any previous factors driving the price of gasoline upward are likely to be exacerbated by OPEC's decision to cut oil production by 2 million barrels per day from November, announced on Oct. 5. Analysts believe the cuts are intended to boost a recovery in crude oil prices, as the cost of a barrel has fallen from around $120 four months ago to $80 by early fall.
The Biden administration rebuked OPEC for the decision in a statement on the same day as the announcement, saying that the Department of Energy will deliver an additional 10 million barrels of oil from the U.S. Strategic Petroleum Reserve to the market in November in an effort to mitigate the potential cost increases to the consumer.
Future Impact on Gasoline Prices Unclear
While damage to refineries and OPEC production cuts are likely to contribute to climbing gasoline prices in the U.S., there are other factors that may also cool this growth. Demand for gasoline is typically highest in the warmer months, falling in the winter as consumers drive less. During this time of year, refiners also produce cheaper winter-grade fuel, which keeps costs down. Additionally, the Biden administration may be particularly motivated to keep fuel costs down ahead of the November midterm elections.