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Why Gasoline Prices are Rising in February

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February 12, 2013 by   - () 1 Comment

It starts here.

A combination of high crude prices, refinery shutdowns and early speculation has sent gas prices soaring to seasonal highs earlier than usual this year, with no signs of prices at the pump falling until spring, according to recent estimates.

The Christian Science Monitor reported that gas prices have climbed every day for the past 25 days, reaching a national average of $3.59 per gallon on Monday (Feb. 11), the most expensive national average ever for a Feb. 11, according to AAA.

During just the past two weeks, average prices have climbed almost 25 cents, the biggest jump in gas prices in almost a year.

This is a very early rise,” says Tom Kloza, chief oil analyst at the Oil Price Information Service (OPIS). “January has tended to be a quiet month through the years, but the rally really began in earnest around Jan. 15.”

Gas prices tend to increase in late February as refineries shut down for maintenance ahead of the busy summer driving season.

There are three reasons for the spike, say analysts.

Higher crude prices. This rise, especially overseas, has pushed up prices at the pump, says Michael Green, a spokesman at AAA.

“This year oil prices are rising with expectations that the global economy will continue to improve,” said Green. “Gas prices are intimately connected to oil prices, [which are] very much connected to what is going on in other parts of the world. Events overseas have a big effect on prices American motorists pay at the pump.”

In fact, crude oil prices have risen 10% during the past two months, and the price of crude accounts for almost 70% of the cost of a gallon of gas, according to the US Energy Information Administration.

Seasonal changes. Refineries usually shut down for maintenance in late winter, temporarily reducing gas supplies. As per federal requirements, refineries also begin transitioning at this time of year to summer blend gasoline – a more environmentally-friendly, and expensive, blend to produce. This reduces current winter blend gas supplies.

Financial market speculation. In addition, the rally has been driven by earlier-than-usual speculation that demand for oil will rise, further inflating prices, said Kloza. In a recent Commodity Futures Trading Commission report, Kloza said he calculated that there is about $45 billion more bet on higher petroleum futures than on lower ones. In other words, more traders expect oil prices to rise in the future than to fall, an expectation that causes oil producers to horde oil in the hopes they can sell it at higher prices later on. That dries up current supplies and translates to higher prices at the pump, which Kloza says we’re already seeing.

 

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Comments

One Response to “Why Gasoline Prices are Rising in February”

  1. Jackie on February 25th, 2013 3:01 pm

    This is ridiculous and should be illegal. Guess what if you speculate the economy
    is going to improve and prices rise, the economy gets worse!!! People do not spend money on luxuries then!!
    It is all just a way to get as much profit our of us little people as they can

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