The average national gas price surged on July 25 in its biggest one-day increase in a year.
Prices rose by $0.04 to $3.64 a gallon, the highest one-day increase since June 7, 2022, according to the American Automobile Association (AAA).
Gas prices are still $0.72 less than they were last summer, when the national average jumped to $5.02 a gallon in June 2022.
However, gas prices have jumped by $0.08 over the past week.
As recently as July 4, gas prices had been experiencing a year-over-year decline, according to the AAA.
Low Gas Prices Eased Inflation Rates
The spike in pump prices follows a surge in oil prices, which have climbed to a three-month high.Gas prices remain higher than in the same period in 2021, but the steady decline in prices over the past year has been a key factor in lowering inflation.
U.S. consumers have been more optimistic because of the lower gas prices, according to the Conference Board’s monthly Consumer Confidence Index, which hit a two-year high of 117 earlier this month.
Economists have bet that a slowdown in inflation—partially driven by lower gas prices—would help avoid a U.S. recession.
Investors were also putting stock in the hope that the Federal Reserve would soon ease its aggressive policy of hiking interest rates to curb inflation.
U.S. inflation in June fell to 3 percent year over year, the lowest level seen since March 2021 and a massive decline from the 9.1 percent high in June 2022, according to the Department of Labor.
Commodities prices have risen in general, after wheat and corn prices rallied in the wake of Russian attacks on port infrastructure in Ukraine.
OPEC, Russian Cuts Lead to Spike in Crude Prices
International price pressures also play a factor in the cost of gas at the pump.Mr. Lipow blamed a recent heatwave and oil production cutbacks by OPEC and Russia for causing the latest rise in gas prices.
The two major players in OPEC—Saudi Arabia and Russia—announced plans last fall to cut crude output by almost 5 million barrels per day through July, he said.
Although the oil cartel has yet to implement the full cuts in output, any cuts that have already been implemented are starting to be felt in the market, Mr. Lipow said.
Last month, OPEC+ agreed to extend oil production as prices continued to fall, and crude prices have since risen by about $7 per barrel.
West Texas crude oil, the North American standard, jumped 2.2 percent on July 25, to close at $78.74 a barrel, the highest close since April 24. This is a significant increase from the $75.75 the prior week, but still well below the $95.54 high of July 25, 2022.Global Heatwave Hits Oil Demand
U.S. consumers may be spending more for gas this week because of rising oil prices and heat-induced refinery outages caused by a worldwide heatwave, as average temperatures hit their highest record of the year.Many refineries that could take advantage of high profit margins may not be able to do so.
“Refineries, like humans, do not like it when the heat index is 115,” Mr. Lipow said.
The heatwave in the Middle East is even forcing Saudi Arabia and other countries in the region to burn oil at a massive rate to power their own electrical grids.
Meanwhile, the national average price for a gallon of gasoline in the United States could jump $0.05 to $0.10 this week, with increases of $0.10 to $0.25 a gallon in some states, Patrick De Haan, head of petroleum analysis for GasBuddy, wrote on Twitter.“With extreme heat also leading to some refinery outages, and with July gasoline inventories at their lowest level since 2015, we’re primed to see the cost increases showing up in force this week across the country,” Mr. De Haan told Fox Business.
“Already this morning, GasBuddy is seeing large price increases in Michigan, Indiana, Ohio, Kentucky, and Florida.”
U.S. gas demand went up last week, rising slightly from 8.76 million to 8.86 million barrels a day, according to data from the Energy Information Administration.
At the same time, total domestic gasoline stocks fell from 219.5 million to 218.4 million barrels.
