AP NEWS

ENERGY Gas prices accelerate higher

May 1, 2019

Beatrice Williams drove around several service stations Wednesday morning looking for one that might have a good deal on fuel — but the prices seemed to get more expensive the farther she went.

Eventually, she stopped at the MLK Fuel.

“I couldn’t go any further, so I guess this is what I’m going to pay,” Williams said.

Gasoline has hit an average of $2.61 per gallon in Beaumont, and the price is expected to rise above $3 as summer arrives.

Prices usually climb at this time of year as refiners start producing more expensive summer blends aimed at curbing smog during the heaviest driving season.

But a combination of factors, including rising crude prices, tighter gasoline supplies and uncertain geopolitics in oil-producing regions means gasoline prices could rise faster and higher.

The rising gasoline prices come as the 2020 presidential campaign begins to kick into high gear. The price of gasoline is a bread-and-butter pocketbook issue that can affect voters’ perception of the economy, their confidence and their opinions of political leaders, analysts say. That may explain why President Donald Trump called on OPEC last week to increase production to moderate crude oil and gasoline prices.

After retreating over the past few days, oil prices are again on the rise as OPEC signals its determination to lift prices higher and conflict between the opposition leader Juan Guaido and President Nicolas Maduro escalates in Venezuela, threatening to take even more oil off the market.

In Southeast Texas, prices have continued to tick up since January, when gasoline was an average of $1.85 a gallon. According to data from GasBuddy, an industry analyst geared toward consumers, prices in April were an average of $2.40 a gallon, a 5 cent increase over last year and a nearly 30 cent increase from two years ago.

Nationally, prices are about $2.88 a gallon, up 64 cents since the start of the year. The national average is expected to top $3 per a gallon soon and hover around there for most of summer.

Adding up

Each sustained 10-cents-a-gallon increase takes about $11 billion out of the pockets of U.S. consumers over the course of a year, according to Moody’s Analytics, the economic research unit of the ratings agency.

Williams said she wasn’t much for summer traveling, but she could use that extra money to go to her grandkids’ games and maybe spoil them a little.

“I’ll have to cut back somewhere, if I can,” Williams said.

Chris Lafakis, an energy economist at Moody’s Analytics, said $3 a gallon is an important psychological threshold that could undermine consumer confidence — and consumer spending — if prices remain at that level for an extended period.

“Consumers will still need to purchase gasoline in order to get to their homes, to their work and travel,” said Lafakis said. “Their perception of inflation and prices are what is most affected by the gasoline prices reaching that ($3 a gallon) level.”

For more price-sensitive drivers, though, a $3-per-gallon price tag would cause them to think twice about whether to get behind the wheel.

Benny Norris, a recent retiree, said he’s taken to driving the family Nissan more often than his diesel truck.

“I’ve just retired, and it is a question whether I can live on my retirement,” Norris said. “You work all your life, trying to make a living, but it seems you can’t get ahead.”

The price of crude oil, the key determining factor in gasoline prices, began its recent climb to about $65 a barrel after the Trump administration moved to tighten sanctions on Iranian crude exports, potentially taking hundreds of thousands of barrels a day off the global market. If OPEC fails to raise output to offset those supply losses, gasoline prices could quickly jump another 5 to 10 cents a gallon, pointing to “a more painful summer at the pump,” said Patrick DeHaan, a senior analyst at GasBuddy.

Tighter gasoline supplies could add to that pain. Even as demand grows with the approaching summer — the peak driving driving season — gasoline supplies aren’t keeping pace. Gasoline inventories decreased by 2.1 million barrels the week of April 19, and are about 2 percent below the five-year average for this time of year, according to the U.S. Energy Department.

Rude awakening come 2020

Some analysts say the biggest shocks to gasoline prices could come at the end of 2019 into early 2020. That’s when a new international marine law goes into effect that will require vessels to use cleaner but more expensive marine fuels.

That change, which is expected to significantly lift diesel prices, is spurring refiners to shift production to diesel from gasoline, which could further tighten supplies, said Claudio Galimberti, refining analyst at S&P Global Platts, a global research and price tracking firm.

S&P Global Platts forecasts that national average gasoline prices could climb to close $3 per a gallon this summer and hover between $3 to $3.20 per a gallon range for most of 2020 — and Trump’s re-election campaign.

“Chances are he’s not going to be happy at all with this,” Galimberti said.

Trump has reacted to rising gasoline prices by using his Twitter account to pressure OPEC to increase production. Those tweets have moved markets in the short term, but S&P Global Platts’ analysis shows that they don’t have a sustained, material impact on oil prices.

Some parts of the country are already experiencing price shocks. In California, refinery outages that crimped supplies helped drive gasoline prices above $4 per a gallon a couple of weeks ago.

Which makes everything relative. Mike Coleman, 37, was filling up at an Exxon station in Houston, where he was happily paying $2.65 a gallon. Coleman said he was visiting friends here from his hometown of Manteca, California, where he can pay up to $120 to fill the tank of his Ford Expedition.

“These prices are great,” he said.

Jacob Dick reported from Beaumont and Marissa Luck from Houston.

jacob.dick@beaumontenterprise.com

marissa.luck@chron.com