April 17, 2024

Gas prices just posted their biggest one-day increase in a year

New York

The month-long lull in gas prices is over.

The national average price of a gallon of regular gasoline rose 4 cents on Tuesday to $3.64, according to AAA.

That’s the biggest one-day increase since June 7, 2022, according to a CNN review of AAA data. However, gas prices are much lower today than they were last summer, when they were over $5 a gallon.

“All of a sudden, things have picked up after a long period of low prices,” said Andy Lipow, president of Lipow Oil Associates.

As early as July 4th, gas prices experienced an almost unprecedented year-over-year decline.

The unwelcome change in pump prices follows a rise in oil prices, which have risen to three-month highs as part of a broader rally in commodities. Wheat and corn prices have soared following Russian attacks on port infrastructure in Ukraine.

The time is difficult.

Cooling inflation, driven in part by easing gas prices, has raised hopes that the United States can avoid a recession. Investors are betting that the Federal Reserve will be able to end its inflation fight soon. And consumers are feeling better, with consumer confidence hitting a two-year high in July.

A result of higher food and fuel prices could offset these positive trends.

To be sure, gas prices are still down 72 cents a gallon from a year ago. And the national average is still far from the all-time high of $5.02 a gallon last June.

Still, gas prices have increased by 8 cents in the past week.

Lipow blamed two powerful forces: OPEC and Russia cutting production, and extreme heat.

Since last fall, OPEC and Russia led by Saudi Arabia announced plans to reduce output by nearly 5 million barrels per day through July, according to Lipow.

While OPEC and its allies, known as OPEC+, have probably not reduced that total output, whatever cuts they have implemented are starting to be felt in the market.

US oil prices jumped 2.2% on Monday to close at $78.74 a barrel – the highest close since April 24. In the six-week period, oil has risen 17%.

Extreme heat in the United States, Europe and elsewhere has also crippled some refinery operations, slightly curtailing production of gasoline, diesel and jet fuel.

Some refineries that want to run all out to take advantage of high profit margins may not be able to.

“Refineries, like people, don’t like it when the heat index is 115,” Lipow said.

High heat in the Middle East is forcing Saudi Arabia and other countries to burn oil to power their electric grids.

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