Why Gas Prices Are Climbing Again After Months of Declines
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Here's your money briefing for Friday, October 7th. I'm J.R. Whelan for The Wall Street Journal. The cost of driving is going back up again. After several months of declines, the price of gas has risen to an average of $3.83 a gallon.
We have seen slightly more demand. It's inching back up, not to the levels that we saw a year ago, but it's certainly adding to the strain on already tight supplies of gasoline.
But demand is just one factor that's been pushing prices higher. In a moment, our reporter Benoit Morin will give us the big picture as to why gas prices keep rising, how this week's decision by OPEC nations to cut production is likely to affect prices, and whether we could see gas cross the dreaded $5 mark again. That's after the break.
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Why are U.S. gas prices starting to climb again after months of declines?
For about the past three months, Americans' household finances have gotten a little more breathing room as the price of gas steadily declined from record levels. But prices are on the rise again, up about 5% in just the past two weeks. So what's the outlook for gas prices going forward? Wall Street Journal reporter Benoit Morin follows energy markets, and he joins us from our Houston bureau. Benoit, thank you very much for being here.
Thank you for having me.
So, Benoit, prices have been rising since well before this week's decision by OPEC Plus to cut oil production by 2 million barrels per day. So what's been pushing the price of the pump higher for the past few weeks?
Well, you've got a couple of factors here, one of them being the maintenance and outages at various oil plants from Ohio to Washington and California. Those are the fuel making plants that churn out the gasoline and the diesel that go into the tanks of American consumers. Those plants, some of them have seen planned maintenance, which is common for this time of the year because you have to prepare for winter blend gasoline. And so you've seen those, which takes some capacity off the market. And then you have seen as well incidents like fires or electric malfunctions at some of those refineries, which means that they're producing less.
How does demand factor into these increases?
So drivers reacted to high fuel prices starting in June. And during the summer season, you usually see drivers take to the road to go on summer trips. We didn't see that that much this summer. That being said, we have seen slightly more demand. It's inching back up, not to the levels that we saw a year ago, but it's certainly adding to the strain on already tight supplies of gasoline. So in fact, in the US, drivers consumed 8.77 million barrels of oil a day last week, which is about 2% more than the previous week. And the reason we have tight supplies of gasoline is because we've seen less capacity coming online as far as refineries, or more precisely, capacity coming off after the pandemic. So we've lost roughly 1 million barrels per day after the pandemic in the US and 3 million globally.
So that's that much gasoline that is not being made.
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