At a time of year drivers expect to see some gas price relief following the end of the summer vacation season, prices at the pumps across the U.S. just hit a high for the year and further increases may be in store.
AAA reports the average price of a gallon of regular on Tuesday came in at $3.88, the highest yet in 2023 and 20 cents more per gallon than a year ago. While Utah gas prices were averaging $4.29 on Tuesday and only up about 3 cents per gallon from this time last year, Utah is currently among the top 10 most expensive states to fill up your tank.
Crude oil prices have been on the rise for months and that trend continued early this week and were in the $92-$95 per barrel range at midday Tuesday, the highest since late last year. Even as demand has decreased in the U.S., the wholesale cost of petroleum has been on the rise, driven in part by a continuation of production limits instituted by a group of petroleum producing nations.
AAA spokesman Andrew Gross said the production cuts are offsetting the typical seasonal declines as demand drops off ahead of the start of fall.
“Oil costs are putting upward pressure on pump prices, but the rise is tempered by much lower demand,” Gross said in a web posting late last week. “The slide in people fueling up is typical, with schools back in session, the days getting shorter, and the weather less pleasant. But the usual decline in pump prices is being stymied for now by these high oil costs.”
Beside taking a bigger bite out of household budgets when it comes to keeping vehicles on the road, energy costs in general, and the cost of gasoline in particular, have helped drive up overall inflation. Higher fuel prices contribute to elevated costs across the economy as retailers and suppliers pass on the higher expenses of shipping and distribution.
Earlier this month, the U.S. Labor Department reported elevated gas prices were the primary factor behind a jump in annual inflation from 3.2% in July to 3.7% in August. Core inflation, a calculation that strips out volatile food and energy prices, moved down in August, dropping to a 4.3% annual rate after coming in at 4.7% in July, according to the latest Labor Department data.
Earlier this month, Saudi Arabia and Russia, as part of the OPEC+ producer group, extended combined supply cuts of 1.3 million barrels per day to the end of the year, per Reuters.
Some petroleum industry analysts predict wholesale crude oil prices could reach $100 per barrel before easing.
“The market is starting to realize that wherever you look there are concerns about tight supply, whether it’s crude oil, diesel or gasoline,” Price Futures Group analyst Phil Flynn told Reuters. “We’re getting a reality check.”
In a web posting, AAA notes that according to the International Energy Agency’s September 2023 Oil Market Report, production cuts from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries will lead to an oil supply shortfall this fall and winter.