The Outlook for Gas Prices This Summer
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How high are US gas prices right now and why does it matter for summer travel?
Here's your Money Briefing for Friday, July 2nd. I'm J.R. Whelan for The Wall Street Journal. We're heading into the Fourth of July weekend, and that means millions of Americans hitting the road. But can your wallet handle it? Gas prices are at their highest level in nearly seven years.
Oil demand is rising faster than it has in many years in the United States. It's projected to rise about 9% from the first quarter to the third quarter, which is faster than any time in recent memory except for last year.
Coming up, we'll check in with our energy reporter Colin Eaton on what to expect at the pump as you make your summer plans. That's after the break.
What explains the recent sharp rise in gas prices — supply or demand?
The average price of a gallon of gas is about a dollar more than it was this time a year ago. So where are prices likely to go for the rest of the summer? And how could that affect travel plans? WSJ reporter Colin Eaton joins us from Houston, where he's been tracking the price of oil. Colin, thanks for being with us.
Thank you, JR.
So Colin, gas prices feel like they're out of control. I mean, the price is higher every time you pull up to the pump. So let's talk about why. Basic economics would tell us that supply and demand both play a role in price increases. So I want to tackle both halves of that equation. So the first question is, is there a gas supply issue in the U.S.
Are there regional fuel supply problems and what's causing logistical outages?
?
So there's not exactly a supply problem per se. There are logistical issues that we're running into in patches of the country. So while this is not like what we saw with the Colonial Pipeline cyber attack back in May, that was that drove a fuel run across the southeast. There were thousands of gas stations there. out of gas and the main artery for fuel to the east coast was offline for several days. That's not what's happening here. We have a shortage of truck drivers. A lot of folks were laid off in the pandemic and it hasn't been easy to hire everyone back and get that fleet of trucks up and running, particularly to the extent to meet demand that's happening right now. We're going to need another 2,600 to 3,000 trucks to get that fuel from the hundreds of terminals across the country to the thousands of gas stations.
We're seeing right now some outages in places like the Rocky Mountains, southwest Missouri, parts of the Florida Keys. There have been pockets of outages. And I think analysts are saying that despite that, there's still ample supply on the market and there shouldn't be too much of a problem across the market.
Now, a moment ago, you said there's a shortage of 3,000 trucks. How big a number is that in the grand scheme of oil transport around the country?
It's a big number, but as a percentage of the overall trucking fleet, it's not insurmountable. Another 3,000 trucks would get us to about 50,000 across the country, according to the Oil Price Information Service.
How are truck driver shortages and extreme heat affecting fuel distribution?
Okay, so what other factors are at work here? Have this summer's heat waves had any effect on prices?
Yeah, particularly in the Pacific Northwest, the heat is threatening to crimp supplies because extreme weather, particularly refineries in the Pacific Northwest, were not built to handle extreme heat. We deal with that pretty well here in the Gulf Coast. But it makes it harder for those Pacific Northwest refineries to pump out as much fuel as they have been. And so you've seen gas prices in Washington state, in Idaho, in Oregon, jump about 10 cents, 10 to 11 cents just in the past week alone on the impact of that. There have not been yet any major problems, but that region is certainly susceptible to higher prices, more so right now than the rest of the country.
So tell me about the outlook for prices for the rest of the summer. What should drivers who are making plans expect?
The gasoline prices nationwide are averaging about $3.12 a gallon. And analysts believe that because demand is robust right now, that it could go beyond $3.20, even as high as $3.35 a gallon. And that just depends on how robust demand is going to be and how much fuel inventories are are drained by all this additional driving around the country.
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Chapters
6 chapters
1
How high are US gas prices right now and why does it matter for summer travel?
0:05–0:51
2
What explains the recent sharp rise in gas prices — supply or demand?
0:51–1:28
3
Are there regional fuel supply problems and what's causing logistical outages?
1:28–3:33
4
How are truck driver shortages and extreme heat affecting fuel distribution?
3:33–5:43
5
What price range should drivers expect for the rest of the summer?
5:43–6:37
6
Could OPEC production decisions bring gas prices down after summer?
6:37–8:06
Speakers
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