AAA Northeast Senior Manager Robert Sinclair Jr. joins Yahoo Finance Live to discuss the tick up in gas prices, how Florida is bracing for the arrival of Hurricane Ian, and the outlook for oil, diesel, and jet fuel prices.
BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. Crude oil prices today right now sitting at about $80 a barrel. They fell below $80 a barrel, though, for the first time since January 11, as looming recession fears spark concerns around global fuel demand.
Joining us to discuss, we've got AAA Northeast senior manager Robert Sinclair, Jr. Rob, always great to speak with you. First, got to get your take on exactly where this has also trickled into the consumer mindset, too, near term, as we had seen this longer term streak of continuously declining gas prices for a stretch of time. That has kind of come to a halt. However, we're still seeing some of the broader trends still maintain shape.
ROBERT SINCLAIR, JR.: That's right. Last week, we saw a streak of roughly 98 days in a row of declining gasoline prices, as far as the national average is concerned, come to an end. And that was happening. We see now it's-- the national average is up about $0.05 in the last week. And really, that's because of localized problems, as far as planned and unplanned refinery maintenance in the Midwest and West.
And we're seeing just some price hikes out West and in the Midwest that are just really just off the chains, as the hipsters might say. Iowa is up $0.15, but the loss leaders are California, Wisconsin, and Oregon. They are $0.35 and $0.36 higher per gallon in just the last week.
There was a fire at a refinery in Ohio. In Ohio, prices are up $0.17 in the last week. And that's leading to problems that that's the unplanned maintenance at refineries. We're seeing a lot of switching over now to winter blends of gasoline. And that's the planned maintenance problems. And that leads to spot shortages and higher prices.
Yet despite that, we're seeing in the Northeast and in the Southeast, lower prices. In the New York region, we're $0.05-- I'm sorry, we're $0.11 lower in the last week. So it's really a mixed bag across the country. But while gasoline prices are cheaper, they are not cheap.
I think back to a survey that we did in March of 2018. We asked the drivers what the pain point was for the price of gasoline. And 40% said $3 a gallon. And we're still above that. So there are a lot of drivers that are still suffering. And that survey was done during a better economy. So I just worry that the number is even lower now.
BRIAN SOZZI: Yeah, they're still high. Robert, I paid $4.98 yesterday at my local 7-eleven. That's after getting my rewards program kicking in. I got, I think, $0.11 off a gallon. I thought I was feeling pretty good, but just not a good experience for me there. Now, you did mention problems. And one problem, I think, we're all watching is Hurricane Ian. What impact, if any, will that have on gas prices?
ROBERT SINCLAIR, JR.: Well, it will certainly have localized impacts, no matter where it hits, especially if it knocks out electrical power because when there's no power, there's no pumping of gasoline. So one of the things that FEMA is warning people to do is to fill up their tanks. And you see that's happening with long lines at gasoline stations in that region.
Were that storm to shift to the West, to Texas, Louisiana, and Mississippi, where fully a 1/4 to a 1/3 of the oil and refining gasoline infrastructure is located, we could see prices just go crazy overnight. I think back to hurricanes Katrina and Rita, which hit those areas. And we saw overnight increases of $0.25 to $0.30 per gallon back then. The increases would probably be even higher now because we're dealing with higher prices.
So it's really going to depend on the track of the storm. It is a major storm. It has a local problem. Then certainly that-- the problems will be local. And in Florida, there's only one pipeline in Florida. It's from Tampa to Orlando. Florida relies exclusively on maritime delivery of its supplies.
So disruptions in the Gulf of Mexico will lead to tankers and barges not able to get fuel to Florida. So you'll have that problem, in addition to being not able to pump gasoline. And as the track of the storm heads north, we'll see those problems increase and with disruptions in gasoline supplies and being able to pump gasoline in whatever local areas it might hit.
BRAD SMITH: Yeah, amazingly critical to track, especially during hurricane season where this might have a local impact, but even more of a broader planning impact as well. And on the planning front, for a lot of airlines that are really trying to parse through exactly what that demand may look like, going into the last quarter of this year, is the damage already done because they probably would have had to secure so much of the fuel that's necessary when anticipating the demand levels, according to data that they've already seen over the course of this year?
Or is that more malleable? Are they going to be able to-- with this kind of broader trend of prices per barrel coming down, are they able to take advantage of some of the lower pricing now?
ROBERT SINCLAIR, JR.: Well, diesel and jet fuel has been very, very popular over the-- for the fact for the whole year. The price differentials for a barrel of diesel compared to gasoline and refineries are making $40 or $50 per barrel in diesel and jet fuel and maybe $10 to $12 for gasoline. There has been some build up in inventories of products as a result-- well, for gasoline, as a result of lower demand.
But the demand for diesel and jet fuel remains high. People are traveling. AAA is one of the nation's largest leisure travel agencies. And we're seeing that bookings for the upcoming holidays is very strong. And trucks are still trying to alleviate the supply chain problems that we're seeing-- that we have seen around the country and continue to see. So that makes diesel in high demand. And so those prices will continue to be high.
And in fact, gasoline benefited to a degree from those high prices for diesel and jet fuel because when a refinery processes crude oil, it can just, say, make one product. They might want to make more diesel, more jet fuel, but they have to make more gasoline and kerosene and home heating oil at the same time. They cannot parse out those individual products. So gasoline prices benefited from that, is why we saw those decreases since mid-June.
Going forward, it's really going to depend on refinery capacity, which is not able to keep up with demand for the most part, while barely able to keep up with demand. And that we are seeing problems in some gas stations not being able to have all their pumps in operation because they cannot get all the gasoline that they need. And there's still a shortage of truck drivers. That affects things.
So going forward, it's really going to be a situation that we have to watch very, very closely. Generally, crude oil is anticipated to stay lower with demand lower than lockdowns because of COVID and China, which is the number one importer in the world of crude oil, and worries about recession. And again, we saw crude oil fall below $80 per barrel last week since January 11 for the first time. So it's a mixed bag.
Really watching these markets and trying to predict where they go is very difficult. It's a very fickle market. And we still have that big X factor of the war in Ukraine and what's going to happen with natural gas. That affects diesel. A lot of industrial plants and electrical plants in Europe are switching from natural gas to diesel and as the United States exporting more diesel to those areas, and that keeps the pressure high on prices for that particular product.
BRAD SMITH: Robert, just while we have you, since you mentioned trucking, if we kind of bring this into the broader logistics space, even as we were breaking down FedEx earnings last week, for the end consumer that, earlier this year, had seen higher shipping prices that they were seeing pass through to them as a result of higher fuel or energy prices, just to get those packages delivered, should we see or expect any near-term alleviation of some of those shipping fees that have gotten tacked on? And have they started to come down, especially going into big sales season, whether that's the Amazon Prime Day or whether that is in to the holiday season?
ROBERT SINCLAIR, JR.: I think those Prime days and those bargains that you get from them, consumers should take advantage of because diesel remains expensive. The nationwide average is at 4.89 right now. It had been higher than $5 for a long time, but there's nothing on the horizon that projects that those prices will come down any time soon. So it will continue to remain expensive for truckers to refuel their vehicles.
We are over $5 per gallon for diesel in the Northeast region. And just think about it. The average big rig holds 300 gallons. And at $5 per gallon, that's going to be a lot of money that that truck driver is going to have to shell out to refuel their vehicle. And those expenses get passed on to the consumer. And that keeps the pressure on inflation to be higher. It just keeps it going. So I don't see anything in the near future that's going to ease that pressure for those that are engaging in e-commerce to a high degree.
BRIAN SOZZI: Appreciate the good news there. All right, we'll leave it there. AAA Northeast senior manager Robert Sinclair, Jr., always nice to see you. We'll talk to you soon.
ROBERT SINCLAIR, JR.: Thanks for having me.