Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States

Gas Prices Likely to Stay Below $4 This Summer

TAGS: Management
Gas Prices Likely to Stay Below $4 This Summer


Drivers have something worth honking their horns over: Summer gasoline prices likely will remain below $4/gal., says Wally Tyner, a Purdue University agricultural economist.

Market conditions that caused oil prices to shoot past $110/barrel have improved in recent weeks, pushing oil back under $100 a barrel, says Tyner, an energy policy specialist. He cautions that pump prices could rise again if oil production is interrupted. Memorial Day weekend traditionally marks the beginning of the summer driving season.

"If crude oil stays below $100 – meaning that there are no further production disruptions in the Middle East or elsewhere and we have no further weather conditions or other factors that cause refining outages – we have seen the worst," Tyner says. "We can hope for steady or even somewhat falling prices over the next few months."

Motorists have experienced severe gas pains this spring, with pump prices in some places topping $4.25/gal. Prices have soared for several reasons, Tyner says.

"First, there was the conflict in Libya that sent crude oil up about $15/barrel," he says. "That normally translates to an increase at the pump of about 40¢/gal. Shortly after that event, we had the change from winter to summer blend gasoline. That change occurs on May 1, and the impact is felt a bit before that as refineries and stations make the switch. Summer blends normally are about 10¢/gal. higher than winter."

Domestic oil refining also hit a snag. Refineries on the East and West coasts experienced outages, and excessive spring rain and flooding slowed barge traffic on the Mississippi River, affecting Gulf Coast refineries.

"The combination of these factors sent what are called 'refining margins' off the chart," Tyner says. "Normal refining margins are about $12/barrel. These events sent refining margins on average to about $23 for a short period, and up to $30 in the Chicago area. These extraordinary refining margins added another 26+¢/gal. at the pump."

All told, these issues tacked on at least 76¢ to a gallon of gas, Tyner says.

Although crude oil prices have retreated, they are still higher than a few months ago, Tyner adds. Refining margins are again in the normal range, but it will take time for those lower margins to be reflected in retail prices. Consumers will continue to pay the summer gas premium of about 10¢/gal., he says.

"What happened this spring is not likely to be repeated," Tyner adds.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.