Lingering U.S. Winter and Ukrainian War Could Spark Perfect Gasoline Storm
By Daniel J. Graeber for OilPrice.com
The extreme winter weather pounding the eastern half of the United States is keeping many drivers at home. That means less demand along with lower prices at the pump compared to last year. Unless something gives, however, geopolitical issues in Ukraine could spell trouble for consumers, AAA said Monday.
AAA reported a national average price for a gallon of regular unleaded gasoline in the United States of $3.46, a price that's 17 cents higher than the same time last month but 30 cents less year-on-year. The national average price for Monday, however, is the highest since Sept. 24 and marks the 24th straight day of increases.
Michael Green, a spokesman for AAA, told Oilprice the extreme winter season is keeping many drivers off the road and thereby suppressing demand.
"Many people drive less when the weather is cold and the roads are dangerous, which means not as much gasoline is needed to meet market demand," he said. "The winter weather has helped to delay significant price spikes and helped to alleviate problems resulting from refinery maintenance and decreased production."
Last week, the U.S. Energy Information Administration said the brutal cold this year impacted refinery and pipeline operations in the country. Refineries in the U.S. Midwest closed down briefly in January when the so-called polar vortex brought sub-zero temperatures to the region and the National Oceanic and Atmospheric Administration reports temperatures in the eastern half of the United States should stay at least 30 percent below normal for most of the first week of March. Despite winter's slow fade, Green said there have been no recent problems at refineries in the Great Lakes region, where gasoline prices tend to be more vulnerable to downstream issues than the rest of the country.
On the geopolitical front, Russian President Vladimir Putin said he was protecting his national interests by sending troops toward Crimea, something NATO Secretary-General Anders Fogh Rasmussen said violated the charter of the United Nations. Green said crude oil prices were "jumping" Monday in response to the crisis because of Russia's influential energy presence.
AAA said gasoline prices in the United States ended February with the largest on average increase since July. The lingering cold weather, along with regular maintenance at the nation's refineries, means it may be April before prices start to come back down for U.S. consumers. For Green, the situation overseas could make what's normally one of the costliest seasons for gasoline prices even worse for U.S. consumers. Gasoline futures have increased "significantly," he said, because of the potential that oil prices will increase further in response to the Ukrainian crisis.
"Those higher prices will reach consumers at the pumps soon if the situation remains unchanged," he said. "There is a good chance that average gas prices will rise above $3.50 per gallon this week."