(Bloomberg) -- A record plunge in gasoline stockpiles last week is threatening to raise pump prices across America above $3 a gallon for the first time in six years.
Inventories fell by 13.6 million barrels -- the most in weekly data that goes back to 1990 -- after a deep freeze paralyzed much of the Gulf Coast refining sector, according to the U.S. Energy Information Administration. Demand for the fuel meanwhile rose by the most since May.
Even before the cold blast crimped gasoline production, restraint from OPEC and the U.S. shale patch had sent crude futures -- and in turn fuel prices -- skyrocketing. The higher costs are hitting just as demand is rebounding with states lifting pandemic restrictions and coronavirus vaccines becoming more widely available.
If more gasoline supplies aren’t added to the market soon, prices at the pump could average $3 a gallon this summer for the first time since 2014, said Patrick DeHaan, head of a petroleum analysts at GasBuddy in a tweet. The national average was at $2.74 a gallon Wednesday, according to AAA.
It may take at least another week to completely restart everything shut by the storm. Six of 16 refineries in Texas shut because of the winter storm have restarted all impacted units and are in the process of ramping up production.
The margin of profit on refining crude oil into gasoline and diesel, known as the crack spread, is trending near its highest since February of 2020, with the exception of the day crude futures fell below zero. Gasoline futures in New York are nearing $2 per gallon for the first time since May 2019 after surging almost 40% so far this year.
“We might see some localized shortages, and gas prices could go up,” said Trisha Curtis, chief executive officer of oil analysis firm PetroNerds in Denver. “We would expect production to return with refining margins still climbing.” Many refineries were running below capacity during the pandemic to avoid swelling inventories with unused product. Refinery utilization may increase as refineries ramp back up ahead of the summer holiday.
“Folks are going to the national parks and the state parks for road trips now,” Horace Hobbs, chief economist at refiner Phillips 66, said this week at the CeraWeek virtual energy conference. “That uses a lot of gasoline.”
--With assistance from Barbara Powell and Andres Guerra Luz.
© 2021 Bloomberg L.P.
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