Image source: Marca
While gasoline prices have only recently fallen, they are expected to rise in the United States, potentially reaching a national average of $4 per gallon.
Despite the worrying news, there is a silver lining as prices are unlikely to stay there for long.
In areas where they are high, gas prices are already falling.
On Monday, the national median price for a gallon of regular gasoline was $3.92.
The price is up 12 cents over the past week and 24 cents since ending the 98-day price slide late last month.
The rise is partly due to OPEC+’s decision to cut production by 2 million barrels per day to raise prices.
In the United States, the high prices are due to reduced refining capacity, with several refineries on the West Coast being out of service due to accidents or maintenance.
According to Tom Kloza, global head of energy analysis at OPIS, nearly 18% of the country’s refining capacity was offline when OPEC announced the cut.
OPIS tracks gas prices for AAA.
With refineries coming back online, gas prices on the west coast of the United States are already falling.
Read also: Americans Relieved as Gas Prices Continue to Sink
Prices in California, which accounts for nearly 10% of the nation’s gasoline consumption, fell 5 cents last week, according to AAA.
However, at $6.33 per gallon, the state still has the highest average gas price in the United States.
Oregon has the third highest prices after California and Alaska, but prices also fell 10 cents to $5.53 a gallon.
“East of rockies prices have been rising,” noted industry analyst Andy Lipow.
“But west of Rockies, the prices are already falling now that the refinery outages are ending.”
Lipow speculates that the short-term national average is close to the peak.
This week’s average is also expected to hover between $3.95 and $4 a gallon before it starts to drop again.
Andy Lipow said that prices east of the Rockies are likely to follow western prices and start falling next week.
By Halloween, he thinks the national average could drop to $3.80 per gallon.
Read also: Used car dealer CarMax warns that even used cars are becoming more unaffordable
Prices across the United States
Currently, about 25% of the 130,000 gas stations in the United States sell regular gasoline for $4 or more.
The numbers are down 15% from the end of the price decline last month.
Thirteen states currently have national averages above $4 per gallon, including:
According to Lipow, the OPEC+ cut is already priced into current prices, so oil traders will be “looking ahead to demand.”
Demand is likely to suffer from the growing recession fears that have risen in the United States and around the world.
Recessions typically reduce demand as fewer people have jobs to commute to and consumers limit overspending.
Gas is a necessity that consumers buy regardless of price, what economists call an “inelastic” good.
However, Lipow pointed out that consumers are reducing their driving after the U.S. median price hit a record high of $5.02 in mid-June.
Consumption fell nearly 6% a month later. He added that winter heating bills, which will be higher than last year, will likely drive even more reductions.
Andy Lipow also noted that homeowners don’t see the monetary value when adjusting their thermostats.
“But at the gasoline pump, you do see the price, and you can decide to cut back on what you spend.”