Gas Prices in Some States Expected to Rise Despite Broader Falling Trend: Expert

A customer prepares to pump gasoline into his car at a Valero station in Mill Valley, Calif., on July 12, 2021. Justin Sullivan/Getty Images

An uptick in the price of wholesale gasoline is squeezing profits at stations that lowered prices most aggressively amid a broader falling trend nationally, with GasBuddy head petroleum analyst Patrick De Haan predicting that prices at the pump in several states will likely shoot up soon.

De Haan wrote on Dec. 26 that a 15-cent-per-gallon over-the-week rise in the price of wholesale gasoline means stations in some regions are caught losing money, “triggering a likely hike soon.”

“Expecting a hike soon in #gasprices in Michigan, Indiana, Ohio, and areas of Kentucky and Illinois as soon as tomorrow as retail gas prices are now at/below margin in many of these areas,” De Haan wrote on Twitter, adding that he expects a jump to between $3.09 and $3.25 per gallon in Michigan, Indiana, and Ohio, and higher than that in Illinois.

As of Dec. 27, retail regular gasoline prices in the four states in question were: $3.002 in Ohio, $3.091 in Michigan, $3.046 in Indiana, and $3.372 in Illinois, according to AAA.

In all four states, the prices were lower than their respective week-ago and month-ago averages, though they remain well above their levels of a year ago, mirroring a broader nationwide trend that has seen the national average pump price drop around 11 cents per gallon over the month, but remaining around $1.03 per gallon more expensive than a year ago.

According to a Dec. 23 note by AAA, all four states that De Haan says are poised to raise prices this week dropped pump prices by 5 cents per gallon over the week, marking the sharpest reduction among all states.

“Such a hike is *routine* for this area as stations often aggressively lower prices until they make no money, triggering a hike. This is not a sign of a broader trend,” De Haan wrote.

The pace of gas price declines has slowed in line with a reduction in demand, AAA stated last week, while noting that a potential uptick in crude prices would likely trigger higher prices at the pump.

“Typically, falling demand and increased supply would support higher drops in pump prices, but fluctuations in the price of crude oil have helped to keep pump prices elevated. If crude prices continue to climb, pump prices will likely follow suit,” the agency stated.

Elevated gas prices have been one of the faces of the broader inflationary trend, frustrating drivers and becoming a political problem for the Biden administration, which announced the week of Thanksgiving that it would release crude from the national strategic stockpile in a bid to cool pump prices.

Last week, White House officials touted the broader trend of falling pump prices.

“As people head out for the Christmas weekend, gas prices continue to drop -- down 25 cents a gallon in many places since @POTUS announced the globally-coordinated strategic petroleum release,” White House chief of staff Ron Klain wrote on Twitter on Dec. 23.

While gasoline prices have eased recently, they remain far above the year-ago national average of $2.253 per gallon.

Republicans have criticized President Joe Biden for relying on OPEC to ramp up supply to counter higher prices at the pump, rather than boosting domestic oil production.

After taking office in January, Biden signed executive orders that shut down construction of the Keystone XL pipeline, which would have been able to transport oil into the United States from oilfields in Alberta, Canada. The administration also put a freeze on some new drilling sites.

Fuel prices are one of the major factors pushing up inflation in the United States, which soared to a multi-decade high in November.