A disruption in distillery inventory in February was one source of gasoline prices spiking after several weeks of gradual decline at the pump.
BP’s refinery in Whiting, Indiana, experienced an unplanned outage in early February and was expected to return to full production in March, according to reporting by Reuters. The plant produces 435,000 barrels per day in regular operations.
The price for conventional blendstock for oxygenate blending (CBOB) gas prices rose almost 25% on the Chicago market, and 20% in Gulf Coast markets, from Jan. 24 to Feb. 9, according to the U.S. Energy Information Administration.
CBOB is a petroleum gasoline stock that refiners produce before blending it with ethanol to make finished motor gas.
The U.S. weekly all-grades conventional retail gas price for Feb. 26 came in at $3.23, a sharp increase from the $3.06 price on Jan. 29. That national price had held between $3.02 to $3.06 since Dec. 18.
Diesel fuel prices likewise saw a bump going from a $3.86 national average on Jan. 29 to $4.10 on Feb. 19, before dropping a week later to $4.05 on the Feb. 26 average.
Gas and diesel prices have been on a lower trajectory since early 2023. Diesel prices hit their peak in the U.S. average on Jan. 23, 2023 at $4.60 per gallon, while the conventional gas price reached its 2023 high during the summer vacation season at $3.81. Other flashpoint comparisons would be the $4.91 per gallon price in summer 2022, and $3.40 per gallon after the first weeks of Russia’s invasion into Ukraine.
The national average at the end of 2020 was $2.25 per gallon all grades convention price.
Current events in the Middle East have also caught the eye of markets, starting with the Oct. 7 attack by Hamas into Israeli settlements, which resulted in escalated responses from Israel into Gaza.
“Crude oil markets might be less exposed to conflict in the Middle East than they were 20 years ago, but a wider geopolitical situation spilling over to involve Iran creates more risk for oil supply disruptions,” wrote CattleFax Analyst Marcus Brix in a Nov. 3 report. “A 3-million-barrel-per-day reduction from Middle East producers would drive oil prices up about 20 percent, according to estimates from the World Bank, sending spot crude oil to test annual futures highs above 95 dollars per barrel.”
In its Long Term Outlook report issued in January, CattleFax noted that the U.S. has been the largest oil producer for five straight years, and foreign production in OPEC nations has slowed. U.S. production could also be hampered by inflation, interest rates and an overall dip in demand. U.S. domestic fuel usage was projected to be 2% lower in 2024, following similar declines of 6% in the past two years.
Prices could therefore be based on net outflow of petroleum from existing inventories. “This lends to an overall price trend towards sideways to higher in 2024, with a price range comparable to recent years,” the Long Term Outlook reported.
