Higher Refining Costs Could Increase Summer Gasoline Prices

by Creating Change Mag

Average monthly prices for regular-grade retail gasoline in the United States could rise by more than 10 cents per gallon if refinery output falls short of expectations. This is according to an analysis published on May 14 by the U.S. Energy Information Administration (EIA).

In the May Short-Term Energy Outlook (STEO), which serves as the Base case for this new analysis, the EIA forecasts that summer regular retail gasoline prices will average around $3.70 per gallon. The new analysis, a Perspectives supplement to the May STEO, explores a High Refining Cost scenario, examining several potential factors that could drive prices higher.

The High Refining Cost scenario in the analysis considers several key factors:

  1. Lower Gasoline Yields: Reduced production of high-octane gasoline blend components could result in lower overall gasoline yields, leading to increased costs.
  2. Regional Price Differences: The analysis looks at the impact of widening price differences between retail prices on the East and West Coasts compared to the Gulf Coast. These regional disparities could affect supply and demand dynamics, further influencing prices.
  3. Higher Regional Prices and Imports: The scenario examines the influence of higher regional retail gasoline prices, increased gasoline imports, and slightly reduced gasoline consumption. Higher prices in certain regions could drive up the national average, while increased imports might not fully offset the lower domestic output.

If the High Refining Cost scenario materializes, consumers could see an increase in gasoline prices over the summer, potentially exceeding the EIA’s base forecast of $3.70 per gallon. The increase in refining costs and regional price disparities are key factors that could contribute to this rise.

The EIA’s new analysis highlights the potential for higher gasoline prices due to increased refining costs and regional price variations. Consumers and businesses should be prepared for the possibility of higher fuel costs during the summer months, particularly if refinery outputs do not meet expectations. The EIA will continue to monitor these factors and update its forecasts as new data becomes available.

Image: Depositphotos

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