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To the long list of miseries being caused by the unrelenting extreme heat, add the recent dramatic spike in gas prices.
Patrick DeHaan, head of petroleum analysis for GasBuddy, on July 31 reported that the abrupt rise in fuel prices starting the last week of July was due to heat-related outages at some of the nation’s biggest refineries, causing inventories to fall to their lowest July level since 2015 during peak summer demand for gasoline.
“In addition, oil prices surged to their highest level in months, rising to over $80 per barrel due to (Strategic Petroleum Reserve) releases coming to an end and concerns over cuts in supply from Saudi Arabia and Russia, the second and third largest oil producers in the world,” he said. “Motorists have seen average gasoline and diesel prices rise at the fastest pace in over a year, but the rise seen (the last week of July) should now start slowing.”
According to AAA, the national average price of a gallon of regular gasoline was $3.83 as of Friday, with Texas being among the states with the lowest average prices. The cheapest gallon of regular available in Brownsville, Harlingen and McAllen on Friday was $3.11, $3.39 and $3.34, respectively, according to GasBuddy.
DeHaan warned that the approaching peak of hurricane season could make matters even worse.
“Any new issues could easily push the national average over $4 per gallon for the first time in 2023,” he said. “Drivers may want to brace for potentially higher prices yet.”
Refineries aren’t built to operate in sustained temperatures over 95 degrees and are having to reduce the output of refined products for safety reasons, which further squeezes supply, according to industry experts. Meanwhile, four of the largest refineries in country are located along the Texas Gulf coast, which has been broiling under unrelenting heat for more than a month, along with the rest of the southern United States.
Temperatures in Houston are expected to hit at least 100 on eight of the next nine days. Baton Rouge, La., home to a large ExxonMobil refinery, is as hot as Houston if not slightly hotter.
July ended with five straight weeks of gains in the oils markets, with oil prices almost 5 percent higher the last week of July compared to the week preceding it, DeHaan said. This was partly a result of worries over tight supply from OPEC Plus (the 13 OPEC nations plus 10 oil-producing, non-OPEC nations), but mostly Russia and Saudi Arabia, he said.
The price of a barrel of West Texas Intermediate crude oil reached $83.24 early Friday afternoon tapering off. A barrel of Brent crude oil hit $86.65 before dropping during the same period Friday. Oil markets have lurched higher in recent days on news that Saudi Arabia plans to continue production into September that it began in July, DeHaan said.
“With additional economic data looking healthy, the U.S. may be able to avoid a broad recession, adding to the sentiment that oil demand will be stronger as a result, putting the production cut by Saudi Arabia and Russia front and center to the recent rally in oil,” he said.
