BusinessJanuary 9, 2023
Gas inching up in the new year
The seesaw ride of gasoline prices is swinging motorists upward in the early days of 2023 with extremely cold weather in recent weeks hampering refinery production, said analysts for auto club federation AAA. "I see no logical reason why gas prices are this high and why they're going up," said Fred Pullen of Cape Girardeau, who stopped Friday, Jan. 6, at Kidd's North Kingshighway location in Cape Girardeau to fill up...
The seesaw ride of gasoline prices is swinging motorists upward in the early days of 2023 with extremely cold weather in recent weeks hampering refinery production, said analysts for auto club federation AAA.
"I see no logical reason why gas prices are this high and why they're going up," said Fred Pullen of Cape Girardeau, who stopped Friday, Jan. 6, at Kidd's North Kingshighway location in Cape Girardeau to fill up.
"I think the prices are a little high and they need to come down," added Sharon Redcloud of Ullin, Illinois, who visited Huck's service station the same day, also in Cape Girardeau.
Costs
In the last year, the lowest nationwide average price seen, $3.09, was witnessed just before Christmas, on Dec. 21.
The highest average U.S. price in the past 12 months, $5.02, was recorded June 14.
On Saturday, Jan. 7, the 50-state average hit $3.28, up from $3.19 one week ago but down from $3.31 one year ago.
In Missouri, Saturday's statewide average notched $2.94, a 9-cent-a-gallon rise from a week earlier and a penny more than a year ago.
County averages Saturday
- Cape Girardeau: $2.98.
- Perry: $2.91.
- Scott: $2.98.
Price ranges by city Saturday
- Cape Girardeau: $2.69 to $3.09.
- Jackson: $2.82 to $3.09.
- Scott City: $2.99.
- Perryville: $2.73 to $2.99.
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Analysis
"[Gas prices] are a major economic barometer for Americans who may not be tied into other things like the stock market," said GasBuddy chief petroleum analyst Patrick De Haan, who talked with the Southeast Missourian at the end of last week. "Gas prices are 'the man-on-the-street' index of how we feel about our broader economy, about our ability to take road trips and get out and be mobile. Americans have this deep love of freedom, and the only thing getting in the way of that freedom is the three-digit sign glaring at you in red that you read on the streetcorner down the street from your home."
De Haan responded to a series of questions about what 2023 may hold in store for motorists.
In a recent interview with this newspaper, you said it's a "guess" what prices will do this year. Do you still hold with that notion?
It's very unpredictable. I'm a petroleum analyst but in the past year, I've been more of a political scientist trying to figure out what Russia will do in light of the Ukraine war and sanctions, but I'm more focused now on China. China's COVID Zero policy has limited the country's need for gas but now China is breaking out of that cycle and reopening. China reopening can have a profound impact on the year ahead as demand for gas there jumps. Remember when Americans started to get a sense of road freedom back when the pandemic eased and ended? U.S. drivers went out and hit the road in huge numbers. I suspect it's just a matter of time before China does the same, and China is a big wildcard for the [gas] market. In Russia, there's been some level of stability in that the Russians haven't curbed its oil exports yet but is threatening to do so. For now, though, the world's third largest oil producer globally, Russia, continues to export. Their continued willingness to do that is critical to stability in energy markets.
You told a business journal the average American household will spend 10% less in gas in 2023 than it did last year for a $277 average household savings. What's the source of that optimism?
The key is refineries. Because we saw gas prices hit for so long and so hard last year that some shut down refineries reopened, and that's critical in the year ahead. We tend to obsess over the price of oil but refining capacity is vital. Oil could be at $1 a gallon, but if there's no one to refine it, gas could be at $100 a gallon. I call lower prices in 2023 a wildcard. Without operating refineries, gas prices will go through the roof. ExxonMobil started a refinery expansion project in Beaumont, Texas, That's great, but it doesn't help the Northeastern U.S., which saw a 335,000-barrel-a-day refinery close just before the pandemic due to a fire. The Northeast has the same refinery capacity as the Rocky Mountains but with 10 times the population. We are seeing refinery capacity expanding in places like Paulsboro, New Jersey, whose refinery reopened because of attractive incentives, but in general terms, government policy going forward is worrisome.
What's the worry?
The Biden administration's embrace of electric vehicles has sent a shock wave to the gasoline industry. Oil companies could be considered stupid to expand gasoline-powered auto factories or refineries because of the move toward EVs. If an auto manufacturer spent $10 billion on a brand-new internal combustion engine factory, what will happen in a decade's time? If the administration has its way, most Americans will be driving EVs, so is that $10 billion investment worth it? That's why no U.S. oil company is going to build a new refinery or even expand one, in all probability, because the writing is on the wall.
California is going to ban internal combustion engines, but the state has no sustainable infrastructure to charge EVs right now.
There is hope, because oil refinery capacity is improving overseas with about 2 million barrels a day being processed outside the U.S. In Nigeria, a massive $20 billion refinery, which has been in the works for seven years, is due to open in the year ahead. Developments in foreign countries should provide the U.S. with some breathing room.
They're not happening in the U.S., which is most ideal, but overseas capacity will help, and that's why I'm hopeful in 2023 U.S. motorists will spend a little bit less.
The recent U.S. cold snap is also being cited for higher pump prices. Will you unpack that for us?
The colder the weather, the more extreme issues can occur at refineries. One Colorado refinery had a pretty large fire because of the cold. Remember, these refineries operate at temperatures between 500 and 1,000 degrees. If anything goes wrong and a valve gets stuck open or shut due to extreme conditions, there can be dire consequences. If one critical piece of machinery fails, you can't make gasoline. A failure may not cause an explosion or a fire, but you may have to restart the refinery, and it could take weeks to reset and get back to normal production.
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